Tag: Demographics

Budgets are tightening, and advertisers need to boost ROI- fast. The social Web is gaining value not only as a medium that delivers measurable results, but also as a resource for gaining insight a company can use to make all of its advertising (TV, print, online) more effective, to increase ROI across the board.

Social media is known for its wealth of useful information. Using relevant analytics can pinpoint audiences and learn more about them. Need to reach adults who are interested in European travel? How about people in Los Angeles who like spy novels? Done. You can even aggregate more information along the way and optimize your ads as you go, to fine-tune your reach and make your campaigns more effective.

But as important as such targeting is – and it is significant – there’s another valuable aspect to social media: the level of engagement of the consumers with the social “medium” itself (compared with any other medium – TV, radio, print or even traditional online).

Use social media to provide access to enough data about demographics, traffic, interests and social actions to pinpoint a target audience and understand them better, and the attention that users give to this medium while they’re engaged.

What you get is the potential to gain unprecedented levels of information about your audiences and your messages by offering people incentives to give some of that attention to you.

The Payoff: Increased ROI

The idea of incentives isn’t new. Most of us have handed over our contact information for the chance to win a trip to Hawaii (or name your destination), or responded to a handful of survey questions to get a free soda with our next meal. The virtual world is no different. In this virtual economy, people still have wants – someone playing a game wants extra points, someone with a virtual pet wants extra gold to buy toys for it, someone in love wants to send a gift of a dozen virtual roses.

The new opportunity for advertisers is to apply the principle of incentives that we’re all familiar with offline to the virtual economy. Offer game points, gold for virtual pets, or a free gift, in exchange for taking a certain action.

It’s in this action where the real gold lies, thanks to the two characteristics of social media mentioned above. No longer are the actions limited to collecting a consumer’s mailing address or surveying for opinions that aren’t tied to any demographics.

The action is to view your ad (banner or video) and answer a few questions about it. The incentive is whatever the publisher is offering as a reward (the points, the gold, the gift, anything).

The payoff to the advertiser is intelligence that will help you increase ROI within all types of advertising.

Your survey can be designed to measure consumer perception:

Awareness – Who has heard of my brand?Attitudes – How do people feel about my brand?Favorability – Do people like my brand?Intent – How likely are people to purchase my products or services?Preference – Do people prefer my brand or products over others?

The right analytics partner can couple those results with user demographics like age, location and gender, along with interests and social actions. For example, anonymous User A is a 45-year-old woman who lives in St. Paul, reads murder mysteries, plays Scramble on Facebook and says she is “very likely” to see the next James Bond movie.

That is a significant amount of actionable intelligence for any company. In our fictional example, using aggregate (and always anonymous) audience information, the movie studio might discover that while it’s been concentrating ad dollars on reaching the male audience, perhaps there’s value in targeting females that match certain demographics.

Beyond its significant value as an advertising channel in and of itself, the social web is becoming a giant testing ground for companies to discover who their audiences are and how to more effectively reach them – from any medium.

The social space is evolving into a place that offers advertisers an efficient way to understand audience behavior and perception – and to reach people with precision targeting like we’ve never seen before. You couldn’t ask for a better incentive to get social.

The more than 20 year old company that was once at the forefront of Internet community building and defined the online experience for many early Internet adopters, is now experiencing a bit of an identity crisis.

AOL has moved far beyond its famous “You’ve got mail”catch phrase/punch line/movie title. So, then how does AOL define itself ? Is AOL an Internet provider, a media and entertainment company, an ad network, an email provider or a Web portal?

While it’s all of those things in one fashion or another,the company is working toward positioning itself as just one thing – a next generation ad network.

“AOL has reinvented itself so many times. It is hard tokeep track,” says Adam Schlachter, senior partner at media and communications consultancy Mediaedge:cia.

AOL’s ad strategy comes at a time when Jeffrey Bewkes,CEO of Time-Warner, acknowledges there is no future in the dial up Internet. There is increasing pressure as media companies and Web portals aplenty are starting and the future is buying or promoting networks as the next step toward”one-stop” shopping for ad buyers.

Acquisition Spree

In an attempt to reinvent itself, AOL has spent about $1 billion acquiring ad-centric companies over the last several years. (See sidebar). AOL’s first big step into the ad market was its 2004 purchase of Advertising.com for $435 million. Advertising.com made a name for itself selling ad space on websites at a time when few were doing it and is the largest third-party display advertising network.

In 2007, AOL bought contextual advertising company Quigo. It alsosnapped up Tacoda, a behavioral targeting company. It bought Third ScreenMedia, a mobile advertising network and maker of mobile software. It also acquired Germany’s Adtech AG, an international online ad-serving firm and added Lightningcast to its roster of companies. Lightningcast delivers advertising for on-demand, live and downloaded video content on the Internet.

The buying spree continued this year. In February AOL acquired Buy.at, an independent affiliate network based in the United Kingdom, with more than 9,000 international affiliates and merchants such as Butlins, Carphone Warehouse, Capital One, Egg, John Lewis, M&S, Powergen, TMobile and Virgin Media.

In March AOL made a step into the Web 2.0 world by acquiring Bebo.com, the fourth largest social networking site, for $850 million. With more than 40 million members, Bebo’s user base is a far cry from the space’s leader MySpace with 109 million.

The Platform Play

AOL’s Platform A division brings together all of AOL’s ad-related silos under a single umbrella. Formed in September 2007, the division has already experienced a series of executive shakeups. Since November, several Platform A executives have exited including Kathleen Kayse, vice president of marketing; Lance Miyamoto, head of human resources; and Dave Morgan, chief ad strategist.

Curtis Viebranz, CEO of Tacoda, who was brought in as president of Platform A, was removed in March. Lynda Clarizio, a nine year AOL veteran that was previous president of Advertising.com, took over the reigns of Platform A.

Clarizio, for her part, has reportedly jumped in with both feet. She is known to have reveled in the start up culture of Advertising.com. PlatformA insiders say she is looking to infuse the many AOL ad groups with that same startup work ethic. And up until recently, the acquired companies had so many department heads with similar roles that many insiders claim various parts of Platform A were essentially competing with themselves for the same clients.

Clarizio has publicly said she will structure teams so that there is only one sales team, technology team, product and operations team, marketing team and publisher services team. She has also combined the overlapping search marketing efforts by Advertising.com and contextual targeting shop Quigo.

In recent interviews with the media Clarizio focused on the short term goals of the group, rather than the executive turnover and claims of integration difficulties.

“As our technology has continued to advance, we’ve gotten better and better,” Clarizio told the Associated Press.”We can handle a lot of demand from advertisers.”She also told the Washington Post that “this is probably the most dynamic industry in the world right now, the online advertising space. To compete effectively in this space, you have to be constantly pushing, innovating new products.”

Some analysts are giving AOL the benefit of the doubt as it works though integrating all its acquisitions.David Hallerman, an analyst at New York-based eMarketer, says, “It takes a while. This is not just buying technologies. It’s buying human constructs, and it takes a while to work out.”

While Platform A is still in its early stages, its reach is already significant when accounting for all the once-disparate units. According to comScore MediaMetrix, Platform A counted 167 million unique visitors in February 2008 and claims 90 percent of the U.S. online audience. However, AOL as a whole, however, ranks fourth as a Web portal, behind Google, MSN and Yahoo.

AOL’s ad revenue is still growing but not at the same clip as previous years. Its ad revenue for 2007grew 12 percent, off the 37 percent growth AOL experienced in 2006 and the 38 percent growth in2005, according to eMarketer.

“AOL appears to be feeling pressure from aggressive sales targets set against the backdrop of a slowing economy,” says Greg Sterling, analyst at Sterling Market Intelligence.

Advertising.com recently lost its biggest advertiser, University of Phoenix, whose ads accounted for $215 million in 2007 and $157 million in 2006- that’s about 17 percent of AOL’s ad revenue growth last year.

There has also been repeated speculation that Time-Warner may sell off AOL and that the recent acquisitions and formation of Platform A is meant to make the company look more attractive to potential buyers or as a spin off company.

And with Microsoft’s bid to buy Yahoo rejected by Yahoo shareholders, AOL is once again mentioned as a potential merger partner with both of those companies as each seeks to thwart Google’s continued dominance online.

Last September there was talk that Platform A itself could be spun out and become public with an IPO. There was also wide spread speculation in the blogosphere that with the dial up business and its Web portal stagnating AOL might change its name to Advertising.com in an effort to clarify its focus to outsiders.

A Big Plan

A key element in AOL’s ad network strategy is the purchase of Bebo.com. Some industry observers say that in a best case scenario, Bebo can leverage the behavioral targeting capabilities from several of the PlatformA companies to better target certain demographics,and will be able to scale to reach a larger audience with AOL’s Instant Messenger.

While revenue from ads on social networks is likely to reach $1.6 billion this year – up from $920 million in2007 – the lion’s share of that money was from MySpace and Facebook.

“It’s hard to know what AOL is getting,” says Ryan Jacob of the Jacob Internet Fund, a firm that invests in Internet companies.

At the time the Bebo.com/AOL deal was announced inApril 2007 there was some debate in the press that AOL was overpaying for the network, given that Bebo’s traffic over the preceding three months had been relatively flat.The Silicon Alley Insider reported that many AOL senior managers were against the deal and that AOL president Randy Falco and COO Ron Grant alone pushed hard for the acquisition. AOL did not speak with Revenue regarding those issues.

In 2006, AOL’s first attempt at dipping into the social network pool (the launch of AIM Pages) was labeled by industry watchers as a misstep. The project was reportedly slow, weighed down by ineffective JavaScript and patched together from up to seven AOL systems. AOL replaced it with a simpler AIM Profiles platform within six months, aping a Facebook look. Since AOL merged AIM Profiles with its extensive Member Directory it gets about 170,000 page views a day, says comScore, however Facebook gets about 1.2 million. “As soon as it bombed, no one wanted anything to do with it,” an anonymous AOL product manager told TechCrunch.

AOL has also faced challenges on the search front. In2007 AOL went from a results page with links for copy, images, song files and other elements to a cleaner page that looked more like Google’s. Reportedly, the reasoning behind the change was that the diversity of search results was slowing down the pages from loading and that had an impact on revenue per search.

But revenue on search in the new format actually dropped to $156 million from $232 million in a previous quarter.

At the time, the top brass at Time-Warner claimed the search improvements would be good for traffic growth. But traffic in the following four months dropped with unique visitors down 0.2 percent from March to May 2008, to 30.6 million in November 2007 from (what), according to comScore.

“It’s troubling that they didn’t know what the impact of the search change would be,” Richard Greenfield, analyst at Pali Research, says. “This raises serious concerns about their ability to run the business and turn it around.”

The Transformation

From a content and functionality point of view, AOL maintains a variety of strong offerings. Its Truveo video search engine sports 100 million videos to search and is on track to total 1 billion by 2009. Its TMZ.com gossip site is on fire with 10 million visitors per month and a spin off TV show. AOL Music’s free music has an array of videos, news and concert tour information and is second only to Yahoo’s music portal.

AOL TV is the only site that hosts shows from all four of the major broadcast TV networks.

One AOL insider, who asked not to be named, says part of the problem is that AOL is unlikely to gain the same type of dominance it once enjoyed and being held to that old standard is unrealistic.

Before the dot com bubble burst in 2001, AOL’s userbase at its height was estimated to be more than 27 million people (it’s now about 10 million) all paying about $19 per month to stay connected. Its biggest coup was the much ballyhooed merger with Time-Warner in 2000. However, things quickly soured and by 2002, the combined company wrote off $99 billion. And, by 2003 the media giant had removed the”AOL” from its name and AOL head Steve Case from his chairman’s seat.

In 2006 AOL seemed to be making a comeback. It became free (it’s all ad-supported) and saw 46 percent ad-revenue growth in a single quarter, 49 percent the following quarter. Its stock seemed to spring back, too, rising as much as 40 percent in a six month period. At it’s height in 1999 AOL’s stock hit about $147. It currently hovers around $15 per share. AOL revenue in 2007 was $5.2 billion and its websites still draw 112 million visitors per month. Plus, it continues to have one of the most recognizable brand names on the Internet.

“If you just look at what AOL has accomplished in the last three years, it is amazing,” the source says. “I just don’t know how anyone can see that as failure. Most companies would kill to have achieved this level of success in online advertising.

Last night you read on your local newspaper’s website about how gas prices could reach $4 a gallon this summer, so you went to a car site to check out some reviews about hybrid vehicles and then visited an automaker site to learn about the car prices. This morning when you checked your email, you saw two ads for hybrid cars.

Did you think – wow, this relevant ad sure is handy or, yikes, Big Brother is watching my every move?

This question is at the crux of an issue that has ignited privacy advocates, who fear that recent acquisitions in the online advertising space will make profiles of consumers more complete and enable behavioral targeting (BT) to become more extensive.

In April, Google announced plans to purchase DoubleClick, an ad-serving service and owner of affiliate marketing network Performics. Following on Google’s heels, Yahoo announced it would complete its purchase of RightMedia, which operates an exchange for trading digital media. Then in May, Microsoft said it would buy aQuantive, which operates a variety of online advertising businesses, and the marketing services company WPP announced its intention to buy ad network 24/7 Real Media (see cover story page 44).

These deals, which vastly increase the amount of knowledge that Google, Microsoft and Yahoo have about their users’ behaviors, validate the speculation that widespread BT is just around the corner.

BT is not new. Microsoft added BT to its AdCenter in 2006, AOL has been using BT technology from Revenue Science, and Yahoo has its own proprietary BT solution. Ad networks have thousands of website clients, and segment the audiences into categories such as car buyers and health food buyers, based on anonymous user activity.

Privacy advocates are concerned that the recent acquisitions will enable Google, Yahoo and Microsoft to construct a full profile of a user’s online behavior, from their initial search all the way through to the time they close their browser. Advertisers that want to discriminate among customers could use these records of user behavior improperly.

Google and DoubleClick

Most of the hullabaloo about privacy concerns is focused on the DoubleClick acquisition because Google, which tracks user search queries and history via user IP addresses, has the lion’s share of the search market. Meanwhile, DoubleClick, which tracks users via cookies associated with graphical ads it serves, has a similar advantage in ad trafficking.

Mark Ward, software engineer for RevCube, a provider for multichannel online ad campaigns, explains that before the acquisition, Google’s behavioral data essentially stopped when the user left the search result page. “Now, if a user stays on major sites [assuming DoubleClick is on the site the user browses] and uses Google to search, it’s conceivable that Google/DC would know what page the user was on, when the user was on it, where the user was coming from, etc., for every page the user ever browses.

In the past, Google, whose famous mantra is “don’t be evil,” has indicated that it would not track its users’ behavior to develop powerful targeting capabilities for display ads because it doesn’t want to snoop on its users. But some believe Google will embrace BT because they are under pressure to find revenues beyond text-based search ads; others say Google bought DoubleClick so they can compete in the display game; and others say it was simply to prevent Microsoft from buying DoubleClick (and still others say it was a combination of several factors).

Google has denied claims of any intent to do wrong. At Google’s annual stockholder meeting in May, Google co-founder Larry Page said, “Our actions over the next 10 years will make it clear we’re not the same kind of companies as you are worried about.” And CEO Eric Schmidt added that the company has “made a commitment not to track user data.” Some point out that if Google wanted to focus on BT, they would have bought Revenue Science or Tacoda, which specialize in it.

But Jeff Chester, executive director of the Center for Digital Democracy (CDD) in Washington, D.C., says that, “Google’s entire business is about personal data acquisition and use.” As it increasingly provides an array of third-party [rich media and interactive] ads, especially for major advertisers [which it is seeking], it will use our data in sophisticated ways to market to us. Google – no matter how high-minded its mission – is ultimately a digital marketing company.”

Publisher of AffiliateFortuneCookies.com Sam Harrelson agrees that Google is already doing BT in an oblique way that ascertains the end user’s browsing habits, click choices and attention data. He says programs such as GMail and Google Reader are giving Google a great deal of quantifiable data on individual (or generic) user habits and how those users browse. “The addition of DoubleClick’s data only solidifies that ability to measure beyond the click or the impression,” says Harrelson.

Privacy advocates are not the only ones considering the profound impact the DoubleClick acquisition will have on the industry as a whole. Chester says that in addition to threats to privacy, “GoogleClick” will become the most powerful media company online, able to handpick the winners and losers of e-commerce. “Instead of robust competition, we will have dot-consolidation.”

RevCube’s Ward agrees and says that the DoubleClick acquisition should make people nervous because Google could become a monopoly that can do every part of online marketing.

The DoubleClick acquisition would give Google a network of publishers and advertisers that provides a vast amount of visitor behavior data to use to target ads across its network. This makes other ad networks worried because Google would be their direct competitor.

Some believe that the DoubleClick acquisition would reduce competition by giving Google 80 percent of the marketing for serving ads to third-party Web publishers.

Harrelson says that ad networks need to continually adapt to the marketplace and not become obsolete in their business model or place in the food chain. “If ad networks are not fastidious in their outlook, this could very well happen as Google, Microsoft and Yahoo continue to chip away at the once-separate performance marketing space.” Ali Mirian, product manager of publisher solutions at 24/7 Real Media, says there are publishers who consider Google to be a major threat to their advertising business – the data that they would run through the DoubleClick system would now be in the hands of Google.

Another disadvantage for affiliates and search marketers is the potential of increased cost per click (CPC). Affiliate Colin McDougall speculates that if Google acquires a lot of information about visitor behavior from initial search through to the shopping cart checkout, it could have an impact on CPC. “Rather than the competition setting the price in the open market bidding system that currently exists [i.e., AdWords], the base bidding price algorithm might get tied more to conversion rates than what the marketplace is bidding.” Harrelson points out that a benefit for affiliates will be a streamlined and automated process for dealing with agencies. He explains that affiliate marketing works best when the ease-of-use factor is higher than the time commitment factor. He sees the DoubleClick acquisition and others opening up the playing field of “affiliate marketing” to many more nontraditional affiliates in the social media and blogging spheres.

Consumer Pros and Cons

Critics say that consumers should be concerned that more complete user profiles will mean that relatively anonymous usage data could be leveraged to link a pattern of behavior to a consumer’s identity and that cross-campaign learning could be used to infer private information, such as sensitive health data.

CDD’s Chester says consumers’ privacy will be further at risk because Google will be in the position to track the majority of consumer actions online including through cell phones. “Such data mining will enable Google to have unprecedented insights into consumer behaviors and expenditures.”

As a result of a complaint filed in April to the FTC by privacy groups including the CDD, the FTC created a special task force and opened a preliminary antitrust investigation at the end of May. Chester says, “The building pressure will result in some policy change ” BT is inevitable – but policy safeguards will be a part of it in some area.”

But not all consumers are worried about giving up their privacy. According to the results of a ChoiceStream Personalization Survey conducted in 2006, the number of consumers willing to allow websites to track their clicks and purchases increased 34 percent from the previous year.

However, the results show no significant decline in the number of consumers concerned about the security of their personal data online, with 62 percent expressing concern in 2006 versus 63 percent in 2005.

“Consumers are starting to become more open to the idea of giving up some privacy in return for a more customized search experience,” says Marketing Pilgrim’s Andy Beal.

However, there must be a tipping point on the curve where the average consumer will start to feel as if their privacy is being disproportionately traded for personalization, “but we are nowhere close to that yet … even with platforms such as Google’s Web History,” AffiliateFortuneCookies’ Harrelson says.

Of course many online marketers are quick to point out that consumers benefit most from an increase in BT. Kevin Lee, executive chairman and cofounder of Did-it.com, a search and auction media agency, says that as targeting improves there will be less untargeted advertising and more advertising that is truly relevant to the consumer, be it text links, banners or video.

And many believe that Google will use the “if you are going to see ads, they might as well be relevant” approach because the customer-centric message complements Google’s brand.

The Ick Factor

But even if consumers do want more relevant ads, it doesn’t mean that they won’t find it disconcerting if the same ad for an MP3 player follows them from site to site. The creepy factor could risk consumer trust – which would tarnish a brand’s reputation – and therefore be a substantial risk for merchants.

Because a privacy incident could damage everyone in the advertising food chain, publishers, ad networks and advertisers are going to have to be clear to consumers that their privacy concerns are absolutely valid and that steps are taken to build safeguards into their systems. Lee says that a controversy could ensue if an ad network doesn’t adequately disclose that ads are being targeted behaviorally.

Ad networks insist they only collect anonymous data, which then is aggregated and analyzed to segment the user into one or more Internet archetypes, such as “car shopper” or “dog lover.” And ad networks are explicit in explaining what data is collected and how it is used and that they give users the option of opting out.

DoubleClick and aQuantive say they give users the ability to opt out of having data collected about them, though privacy experts argue that few people know they have that option.

In an effort to come up with a solution, the NAI, which is a cooperative of online marketing, analytics, advertising and email companies, developed the site at NetworkAdvertising.org. It is a centralized tool that allows users to verify which ad networks have placed a cookie on their hard drive and then users can submit opt-out requests for each network they prefer not to be targeted by.

It’s possible that government regulation could halt BT, at least temporarily. If that doesn’t happen, Marketing Pilgrim’s Beal says that BT implementation will likely be slow and steady to avoid any missteps that could impact the trust built up by the search engines.

Some experts believe there will be a fundamental shift from contextual targeting to BT. Revenue Science’s Basem Nayfeh says behavioral targeting changes the discussion from whether an advertisement is relevant to the content to whether an advertisement is relevant to the person reading the content.

ValueClick, an online advertising behemoth rumored to be an acquisition target, is advocating the adoption of 3D-BT, which would deliver a personalized message across multiple channels. John Ardis, vice president of corporate strategy at ValueClick, explains that 3D-BT is needed because current BT focuses only on display advertising so targets are sent messages that are relevant in display, but appear depersonalized and generic in email and on the marketer’s website.

Regardless of privacy issues and government intervention, there is too much money to be made by targeting consumer’s habits for BT not to evolve – even if those involved need to tread very carefully.

Obama’s got one. So does Hillary. As does McCain. John Edwards has a good one. Rudy Giuliani, Mitt Romney and Bill Richardson also each have one.

It will come as no surprise that all the major 2008 presidential candidates have websites this election cycle. While they are not all of the same quality and some have way more bells and whistles, the sites carry news, video clips and the all-important areas for donations. What is surprising is how well the candidates have harnessed the power of the Internet and what tracking data can do to help their victory. And while the candidates gear up for an astonishingly early election season, it also means marketers and affiliate marketers can take advantage of the interest in this political period to further their cause or add a few ducats to their sales. But challenges still lay ahead.

The Internet as a political platform is not new – just look at the various blogs that have sprouted up since the 2004 presidential election, not to mention the various other new conduits for candidate conversation such as podcasts, user-generated video and cell phone text messaging. Remember that Howard Dean was the first – then virtually unknown – candidate to blog in 2003. This season candidates have more ways to get their talking points out.

Performance marketing network Performics in fact, recently completed a survey that said 42 percent of Americans will seek more information on the 2008 elections from the Internet.

“Campaigns have embraced Internet strategies to stay competitive,” Alexis Rice, project director of CampaignsOnline.org, says. Not only campaigns, but also mass-audience destinations have launched political areas such as MySpace.com’s Impact Channel, where users can drag candidate ads onto their own MySpace pages.

A Burst Media survey found that more than 20 percent of likely voters have actually already gone to a presidential candidate’s website. Of those, one-quarter have clicked on a candidate or advocacy group’s online advertisement. The study also found that use of the Internet to understand the positions of candidates outpaces all other forms of media. A quarter of likely voters said that going online was the best method to learn about the issues, which beat out TV (21 percent), newspapers (17 percent), radio (7 percent), magazines (4.4 percent) and other paper material (3.3 percent).

Back in 2000, before the dot-com bust, pundits and publications made fun of most candidates’ websites, singling out their old information, lack of transaction abilities and their stupefy-ingly bland sense of Web design. Today, just like outdated ASCII art or “site of the day” home pages, political sites have seriously evolved. Now the candidates and the third-party companies that help their digital campaigns are more than savvy; they are refreshingly cutting-edge and Web 2.0 in their approach.

The amount of money being spent and raised online for the elections is also evolving – albeit a little more slowly. Although PQ Media predicts the online campaign ad spend will top $40 million this cycle – up from $29 million in 2004 – it is still dwarfed by the $2 billion to be spent on TV ads alone. And while 38 percent of registered voters received telephone calls from campaigns in 2006’s midterm election push, only 15 percent got email from the candidates, according to Pew Research Center. Advocacy website MoveOn.org raised upward of $28 million in 2006 – the majority of that through online donations. The Center for Responsive Politics measured more than $100 million in online fund-raising by election day. Still it seems a drop in the bucket compared with the $2.6 billion in total 2006 fund-raising.

It may not be huge, but the revenue stream from online is worth tapping into. Candidates for House and Senate seats in 2006 were pleasantly surprised by how much they raised via the Internet. Democrat Joe Sestak earned a House seat in part from the nearly $900,000 he received in Internet donations; $88,000 of that from a single email blast. Democratic advocacy group Act- Blue touts the fact – in big numbers on its home page – that it has received $19,918,240 (at press time) through online donations since 2004. Not to be undersold, the John Kerry campaign in 2004 claimed it owed $80 million of its campaign funds to donations made via the Internet.

While no candidate is likely to refuse money from Internet donations, the biggest realization the Republican and Democratic parties have made – the Democrats more so because they were so challenged by muddled messages in 2004 – is that data is king. Since around 2001, the Democrats, after being demoralized by their defeat, have become conscious of the fact that the GOP simply had better voter data.

One result is that the 2008 democratic candidates have sleeker websites. Another is the Democratic National Committee hired Plus Three, a “progressive” digital marketing firm to build out a database of voters.

The data that Plus Three is going after is basically the most detailed demographics it can get by law; most urgently, email addresses, phone numbers, income and birth dates. Plus Three and the Republican counterpart – Voter Vault – together hold information on more than 165 million folks in their respective hard drives. The most coveted are email addresses because, as Plus Three states, it can mount email campaigns for a fraction of the cost of phone campaigns or TV and print advertising.

Fast Fund-raising

With the data at the ready, campaigns can send email blasts as news happens. Following on the heels of John Edwards’ morning announcement that his wife’s cancer had returned, an email went out that afternoon with a personalized message to all who had registered at Edwards’ website. He was the first presidential candidate to join Twitter (the mini-blog social network) and the first to announce his candidacy online by way of YouTube. On his website, Edwards has all the tech bells and whistles – with profiles on social sites 43Things.com, Bebo.com, blip.tv, Capital Hill Broadcasting Network, Care2. com, Collective.com, Essembly, del.icio.us, Facebook, Flickr, gather.com, hi5, LiveJournal. com, Metacafe, MySpace.com, Ning. com, PartyBuilder.com, Revver, TagWorld, vSocial, Xanga.com, Yahoo360 and YouTube. Edwards also has a Store button on the home page where T-shirts, buttons, mugs and stickers get their showing. Additionally there is a download area for podcasts and RSS feeds.

The week after Edwards broke the news about his wife, ActBlue reported the Edwards campaign received $540,000 through online donations. However, fellow democrat Hillary Clinton raised more than $1 million in online donations the week after her husband, former President Clinton, asked for contributions at the end of February.

The intersection of this highly charged political election and widespread technological advancements is something that marketers can also take advantage of.

CEO of search engine Powerset, Barney Pell, points out three examples of opportunities for online marketers: “First, a bookseller could create a special section on their site that organizes books according to political topics, issues and personalities,” he says. “Second, a company specializing in clean and environmentally friendly products could create a website focused on these issues,” adding that they could then track what the candidates have said or how they voted and then link the issues back to the company’s products. “Third,” he says, “companies could take a stand on issues or back candidates from social media properties. This level of authenticity, while risky, can connect with target audiences in a whole new way.”

Not to be discounted, search marketers can grab ballot-fever by the handle and utilize the “mind-set” of the voter. “Search marketing is a fantastically underutilized area for political candidates to demonstrate their qualifications beyond the status quo,” says Todd D. Malicoat, a search consultant who runs the site Stuntdubl.com. “When someone does a search for a candidate’s name they are volunteering their attention versus the normal approach of a candidate interrupting a voter for their attention.” He says that the information found through search can “actually sway a voter’s opinion” because they are infinitely more receptive to the information. He adds “the difficult opportunity for search marketers is mostly in finding a way to market themselves to the candidates by demonstrating how valuable these services could be to a candidate’s campaign.”

Whatever a marketer’s commitment to showcase political topics or products, Gary Marcoccia, Marketing Director of affiliate network AvantLink, suggests choosing something you’re passionate about. “This makes it easy to maintain and add content on a regular basis,” he says. “Publishers should shoot for 20 to 30 posts a month and think hard about including keywords in the headline and a couple of times in the post itself.” He says, for example, on an eco-friendly blog, a publisher could write a post on how to save energy in the home, categorize it appropriately and then send the traffic on to a merchant that sells low-energy light bulbs.

The other changing face of campaigning in the digital age is commerce versus community building. Hillary Clinton’s site has a good number of videos with her message on her site, as does Barack Obama’s site. But McCain, Mitt Romney, Clinton and Richardson have no online stores.

What the major candidates lack in storefronts, they gain in grassroots efforts online. Democratic-leaning Party- Builder.com lays claim to 10,000 virtual volunteers since September of last year and its Republican counterpart MyGOP says it has “thousands” of online volunteers as well. The Edwards campaign has its OneCorps, a virtual volunteer network that plans and executes grassroots Edwards house parties and serves as a platform for launching other campaign actions. Gone are the days when simply having a website was enough. “The organizational aspect is transformative,” says David Plouffe, a political consultant. When Maryland candidate for comptroller Peter Franchot emphasized his presence on MySpace and Facebook, his campaign got 80 percent of its volunteers from there.

When Maryland candidate for comptroller Peter Franchot emphasized his presence on MySpace and Facebook, his campaign got 80 percent of its volunteers from there.

In a month his volunteers – most of them obtained through online efforts – made 15,000 calls and distributed 50,000 campaign flyers. Franchot did win. Online experts have called this effect the “new virtual playing field.”

Online Voter Army

The site has pulled in 10,000 volunteers since September 2006. The Republican National Committee’s counterpart, MyGOP.com, also claims “thousands of people” and shows Web pages chartering each individual volunteer’s fund-raising progress. When Democrat Ned Lamont ran for Connecticut Senate he set up a space on his website where supporters could type in personal endorsements or “virtual postcards” and send them from the site. He got 25,000 visitors to do this. He beat incumbent Sen. Joe Lieberman.

Another lesson that campaigns still need to learn is the power of performance marketing. As noted, online stores on candidate sites – at least at this stage of the election cycle – carry inconsistent content. More importantly, the stores are mostly populated by products sold by third-party companies, which are either mom-and-pops or come from the direct marketing world.

John Edwards’ store, for example, is run by The Progressive Store, which is owned by Keith Shirey in the Los Angeles area. Shirey, a former janitor who touts the fact that his political buttons were banned on eBay, also sells stickers for Obama, Gore, Kucinich and Clinton. However, he doesn’t offer links to his store like Tigereye Design does. Tigereye sells Obama, Clinton, Richardson, Kucinich and Edwards campaign products and offers cut-and-paste link code for anyone to put a store link on their site.

Data Determination

As mentioned, the Republicans had made great and precise use of data before the 2000 election. Their Voter Vault database is drawn from voter registration and from other public and private records. What shakes out is a potential for the database to have hundreds of pieces of demographic information on every single voter, such as what cars they drive, what churches they go to, what magazines they subscribe to, what political organizations they give money to and even whether they hunt or fish. The data is run through a computer model and a prediction is made about how they are likely to vote. These folks can then be targeted with very specific messages, be that via letter, phone call, email, TV or other collateral. This form of “microtargeting” essentially won the GOP the White House in 2000, pundits say.

Democratic online efforts are motivated by trying to match what the GOP has built. Democratic online volunteer campaigns are aimed at amassing a virtual army of advocate foot soldiers. Voters with personal websites and affiliates can take advantage of the political season by linking to the candidates’ stores; however, there is no commission. If education and awareness are important to the affiliate, a candidate store section would not be out of place on a site selling retail goods or a site or blog that is opinion-based. If an affiliate runs a travel site or coupons, the links might be out of place. Certainly MySpace and other user-generated social sites are an ideal place for store links. One could even link to the candidates’ donation pages where visitors can pledge funds from the bare minimum to the maximum allowed by federal law. Throwing in a few well-chosen keywords at the new areas of a website could increase traffic overall and may generate a sale or two.

“Studies in the retail sector, where users who are served ads get a cookie placed on their machine ” provide a glimpse into how effective online ads can be in planting ideas in peoples’ heads that shape future behavior,” said political blogger and executive director of the Internet Advocacy Center in Washington, D.C., Alan Rosenblatt. Colin Delany of political blog e.politics.com notes, however, that “what the Internet excels at is relationship-seeking and relationship-building,” meaning those who seek out a candidate or sign up for a candidate’s RSS feed are probably already followers of that campaign. But once a potential supporter is in the door, so to speak, the campaign can leverage email and viral messages to help solidify support and donations. The next big step is to track them and target them as well as the online marketing sector has with analytics and what the Republicans did so well with microtargeting.

The multimedia aspects of a candidate’s site have proven popular and engaging. Burst Media reports that 50.7 percent of likely voters stated they would watch a video clip on a candidate website that features him or her talking about the issues. That number held for all age groups, including 55 and older. A quarter of voters said that they would hear a podcast by a candidate outlining his or her platform. Podcast listeners in the 18- to 34-year-old category scored far higher on that question than other age groups.

Right now, the bigger blogs such as RedState or Daily Kos may pull in a wider audience demographically on the Web but are still small numbers compared with the reach of a single campaign email blast. And with a solitary email, Rosenblatt notes a campaign can reach a whole array of donors who give small amounts – $25 to $50 – who wouldn’t otherwise give off-line. As one campaign finance expert noted, “It’s the only way you get a million people to each give you $10 on the same day.”

They hang out for hours on end, actively seeking out new people and things to experience. These “residents” of online worlds – who also aren’t afraid to buy online – match the definition of a desirable audience. With millions of registered users and thousands of dollars changing hands every minute these virtual worlds provide ample opportunity to enhance e-commerce and bolster your brand.

However, marketing to virtual-world participants is very different than in the real world. It requires carefully assimilating into the community of pixelated people and tactics that are more about nuance than numbers. Those who buy not-so-real estate before understanding the culture could cause damage to their brands that carries over into the real world.

Virtual worlds enable people to escape the doldrums of school, work and home life by using altered egos (avatars) to navigate terrain where almost anything goes. Virtual worlds such as Second Life, World of Warcraft, There.com and Kaneva are among the fastest-growing (and most-hyped) destinations for online entertainment, and marketers have been quick to stake their claim.

Second Life has grown from 100,000 to more than 4.4 million registered users within a year, and often has more than 40,000 people online simultaneously. World of Warcraft, a massive multiplayer game, has more than 8 million subscribers.

Console makers are getting into the act as well, creating virtual- world extensions of their gaming platforms to retain their customers when they take a break from killing or competing with each other. The Sony Playstation Home world will launch later this year, while Nintendo has developed a virtual world for owners of the Wii console.

Buying In

Today most of the money to be made from virtual worlds comes from subscriptions and selling virtual real estate. According to analyst firm Screen Digest, online virtual worlds surpassed $1billion in revenue in 2006, but most of it (87 percent) stems from subscriptions paid to the worlds’ creators.

Marketers are spending on in-world events to increase their reach, and most importantly, to get access to a desirable demographic. If you imagine that these worlds are primarily a respite for socially awkward teens, think again. Because the sites require a faster-than-average computer and broadband Internet access, users tend to be somewhat computer-savvy and more educated, according to marketing consultant Sam Harrelson.

“They are not your typical audience,” says Harrelson, who counsels clients on marketing strategies for Second Life. Participants tend to also use many social networking sites such as Flickr and del.icio.us, and because they buy virtual goods such as clothing for their avatars, they are comfortable with spending online. Screen Digest projects that commerce (both business to consumer and consumer to consumer) transacted through these sites will top $1.5 billion annually by 2011.

There.com, a virtual world created by Makena Technologies, has more than 600,000 registered avatars, with participation equally split between males and females, according to Betsy Book, director of product management. The median age is 22, and 70 percent of members are between 13 and 26, she says. Shopping for items for avatars is one of the most popular activities, according to Book.

Learning the audience

Before deciding whether to establish a corporate presence, companies should create avatars and join the virtual world as individuals to learn how people communicate and what their tolerance is for marketing. Virtual-world residents have developed their own culture that must be understood before marketers establish a presence, according to Harrelson. Residents would prefer to learn about companies from their peers rather than be approached by advertisers or overwhelmed with graphic ads. “If you buy a building without a marketing plan you can be wasting a lot of money,” Harrelson says.

Opening a storefront and expecting avatars to cruise by and start shopping is an unreal expectation. Sporting goods and apparel company Reebok did just that and had their store defaced by Second Life activists who are rebelling against the commercialization of their escapist distraction, according to Harrelson. (Buildings can be reset in Second Life, so the damage was only temporary.) The company erred in not doing any community outreach before setting up shop, he says.

Companies must be sensitive to what are considered acceptable levels and aggressiveness of advertising in virtual worlds. “If brands go in and assume that you can have ‘in your face’ advertising, it could potentially be very damaging,” says Greg Verdino, who blogs about online marketing. Companies must “join the community and add value” or risk anti-brand backlash, he say. “A bad brand impression in Second Life can follow you into real life.”

A virtual presence must be interactive and offer some entertainment or incentive to be accepted by the community and to garner traffic, Harrelson says. Just as in the real world, free music, sporting events and item giveaways are the best methods for attracting a crowd.

“If you are not authentic and do not offer anything to the community, you are likely to be ignored, at best,” according to Catherine Smith, director of marketing for Linden Lab, which operates Second Life. “However, those firms who commit to a long-term, creative presence in Second Life have an opportunity to interact with their community in new and innovative ways.”

American Apparel, a Los Angeles-based casual clothing company, was the first retailer to establish a Second Life store, in June of 2006. The younger audience of people who “are into leading-edge stuff” was a good match for American Apparel’s customer base, according to Web director Raz Schionning.

American Apparel held several events to generate attention on Second Life, including a launch party that surpassed expectations. Avatars were lined up outside their store in a four-hour queue, according to Schionning.

He says the company thought a Second Life storefront would be a better investment than advertising in an online game. “I’m not sure that a billboard in a racing game would get us much notice” because of the speed of video games, he says. The virtual storefront is modeled after a Tokyo store and costs a few hundred dollars per month to maintain, Schionning says.

Revenue Slow to Grow

Virtual worlds sell real estate in the form of buildings and islands, which can cost tens of thousands of dollars to set up and maintain. IBM purchased 24 islands on Second Life and has committed to spending $10 million on virtual-world marketing.

MTV set up a virtual Laguna Beach island on There.com to promote its TV show of the same name. Reuters, Cisco, Dell, Wired Magazine and General Motors established virtual-world stores or offices, and Calvin Klein launched CK IN2U, a virtual perfume.

Land speculation is becoming big business in virtual worlds. Companies that don’t want to buy an island or take the time and resources to develop an attractive property themselves can buy or rent a building or office space from a virtual landowner. Second Life real estate developer Ailin Graef of Germany claims to have made $1 million developing and selling virtual properties.

So far the majority of the commerce transacted within virtual worlds is consumer to consumer. People are happy to spend a few dollars to buy a skateboard or outfit designed by a fellow resident. More than $1.6 million changed hands in a single day on Second Life in March, according to the company. Companies such as American Apparel are testing the waters of selling virtual goods to generate revenue, but more importantly, to get more exposure for their brands.

American Apparel sells items (virtual jeans or T-shirts) to avatars to wear while cruising Second Life. The clothes are all modeled on real items, and American Apparel offers coupons for 15 percent off real world items when someone purchases the virtual equivalent, Schionning says. The virtual coupons link to its online store, but the transition between the websites could be smoother. “The technology is a bit too clunky,” he says.

While the 12,000 purchases of American Apparel garb in Second Life currency (Linden dollars, which are purchased with real money) aren’t enough to boost the company’s bottom line, the attention from the media and access to Second Lifers has made it a worthwhile investment. “The value is in the exposure,” notes Schionning.

People tap into their inner consumer through their avatars without the restrictions of the real world. While you might not be able to own a tricked-out sports car or diamond necklace for financial or practical reasons, your avatar can, and marketers can use the boundless possibilities to broaden their branding opportunities.

Residents of There.com can buy or rent apartments and adorn their online homes with furniture or art designed by residents or sold by retailers that represents the life they would like to have, according to Makena Technologies’ Book. Shopping is the most popular activity on There.com, she says. “Your online self represents what you are, and where you live says who you aspire to be,” Book says.

The growth of virtual money-changing got the attention of a congressional committee, which is studying the possibility of taxing virtual purchases. Profits made from selling virtual goods are required to be reported as taxable income when converted into currency, and Congress could tax individual virtual transactions in the future.

Brand aid

While companies should not expect a virtual store to convert its visitors into millions of dollars in online commerce, participating in virtual worlds generates buzz and creates brand awareness that can justify the investment.

“Real-life businesses are generally not looking at Second Life as a revenue opportunity, but rather as a way of extending their brands,” Linden Lab’s Smith says.

Brands that create a positive impression in the virtual realm can transfer that interest to their real-world products, according to Book. For example, Nike sold virtual sneakers that enable avatars to run faster, she says, which reinforces the company’s message of its products’ enhancing performance.

Determining an accurate way to measure the value derived from a virtual store or event is a work in progress, according to Book. “We’re still trying to figure out what works in metrics,” she says. The company is developing methods for tracking avatars’ presence in commercial areas of the virtual world to provide demographic data to marketers.

While a company might be happy that the avatar of a young woman is flirting with others at their virtual party, they can’t be sure that it is not an older married man behind the avatar, making it difficult to be certain who is being exposed to your brand. “There is no way to be sure if the registration [information] is actually who they are,” says Book.

Virtual Cottage Industry

While anyone can join and do business in an online world, creating an experience and brand identity that is worthy of residents’ attention requires an insider’s insight. Hot on the heels of the virtual worlds craze are marketing consultants, ad agencies and graphic designers specializing in building and monetizing in the faux environments.

Companies such as Electric Sheep, Millions of Us and The SL Agency provide consulting services that enable companies to create a virtual presence that is consistent with the rules and culture of virtual worlds. Hiring a graphic artist who has experience building offices or islands in a virtual world will expedite the process for companies looking to build a virtual presence.

Joe Mastrocovi and his partners at Long Island- based Moderne Promotions thought their 25 years of event marketing experience would translate well to the virtual realm. After spending time learning the ins and outs of Second Life as residents, the company launched The SL Agency, a marketing company focused on developing events such as volleyball tournaments, concerts and parties in Second Life.

The same tricks of the trade to entice young audiences that work in malls and clubs (free music, free clothes) also work on Second Life, according to Mastrocovi. The SL Agency purchased an island named Activ8, which provides avatars with a place to ski, wager, dance or cruise the boardwalk.

The company sells virtual outdoor advertising such as billboards on Activ8, as well as sponsorships of events. Mastrocovi says virtual and real-world events can be held simultaneously to maximize the press potential and viral buzz.

Similarly, There.com holds events that match what is going on in the sports world, such as skiing events during the winter, and a virtual grand prix in March, according to Makena Technologies’ Book. Companies can purchase sponsorships to expose their brand to virtual world participants without having to commit the resources needed to establish a permanent presence, she says.

But companies expecting to host a DJ-ed virtual party for a song are mistaken. “The costs aren’t much cheaper than a real-world event if you want to hire talent,” Mastrocovi says. By combining in-world and real-world events, companies can create millions of impressions to websites as well as drive customers to brick-and-mortar stores, according to Mastrocovi.

Just as event companies hire beautiful 20- somethings to hand out merchandise in the real world, Mastrocovi recommends that marketers pay well-known avatars to walk around Second Life and promote a company’s brand. These “brand ambassadors” are people trusted in the virtual environment, and an endorsement for them holds weight with other residents, he says.

Participating in online worlds today provides access to an influential younger audience, but it is a challenge to quantify the return on the investment. In the future the companies that administer these sites will develop better ways of tracking the time that residents are exposed to a brand as well as offer more in-depth demographic data. Makena Technologies’ Book says the company would likely develop methods for sharing details about the people behind the avatars that are attending events and making purchases.

The popularity of virtual worlds is encouraging more companies to create alternatives, including kid-themed universes and even a world based on Shakespearean characters. However, blogger Verdino says consumers will have a limited appetite for virtual participation. “No one is going to join 57 different virtual worlds.”

The technology to make virtual worlds interesting and interactive places to while away the hours has arrived. By getting in early, companies can help to set the course for marketing in these burgeoning worlds.

John Gartner is a Portland, Ore.-based freelance writer who contributes to Wired News, Inc., MarketingShift, and is the Editor of Matter-mag.com.

Food has recently been called everything from the new theater to the new porn. Regardless of how you think about food, you certainly can’t avoid it.

Food has become America’s No. 1 obsession and food companies – from providers of high-end gourmet goodies to those feeding the fast-food nation – are battling to get on the dinner plates of today’s consumers.

And because everybody has to eat, the opportunities are enormous. Consider this: Americans spend 10 percent of their disposable income on food. The typical American household spent an average of $2,434 on food purchases away from home.

The channels for reaching this lucrative marketplace are just as vast. Recent buzz suggests that food companies are spending or planning to spend less of their advertising budget on traditional forms of media in favor of the Internet. But just how much of food companies’ advertising budget will be allocated to online initiatives and how quickly that will take place varies depending on the brand, the brand’s audience and who’s responding to the question.

Tom Vierhile, executive editor of Datamonitor’s Productscan Online, which covers the release of new merchandise, thinks that the CPG (consumer product goods) industry, which includes food, is getting away from traditional advertising because of rampant media fragmentation, something it considers to be a major problem.

Gene Dillard, president of FoodWise, a marketing communications agency that has worked with clients such as Borden Milk and Tyson Foods, agrees that traditional forms of advertising like print are declining because “there are too many different publications that have divided the market so much.” He says advertisers are using the Web because it is more targeted and cost efficient and says there is a trend of moving more ad dollars online. He recommends his clients should “spend 15 percent of their budget online at the minimum.”

Joseph Jaffe, creator of the popular new marketing blog, Jaffe Juice, and previous director of interactive media at TBWA/Chiat/Day, says that food companies are using the Internet more but not leveraging it to its full potential.

“Food companies and CPGs have always prided themselves on their analytical marketing mix modeling and want to be able to look to what has worked for them in the past and repeat it,” Jaffe says. “But this will not work anymore because the industry is changing so quickly and exponentially and there is much that is not predicable.”

New Recipe For Success

Although food companies lag a bit behind other industries, Jaffe says he believes they are increasing their online advertising spending based on two main reasons. One is that Internet display advertising rose 18.9 percent for the first half of 2006 over the first half of 2005 according to TNS Media Intelligence (this does not include paid search advertising.) Jaffe says he believes that spending by food companies accounts for part of this substantial increase.

Reason number two: Many food companies have increased their overall advertising budgets in the last year and Jaffe believes this includes online spending. October’s Advertising Age’s Top 200 Brands found that for the first half of 2006, Campbell’s advertising spending was up 63.8 percent, Kellogg’s increased by 17.8 percent and M&M’s spent 11 percent more than in 2005.

Lisa Phillips, an analyst who covers the CPG space for eMarketer, says food companies are spending more online recently but not at the same pace as other industries such as cosmetics or pharmaceuticals.

“When it comes to product launches for food, companies are still using television.” For example, according to Nielsen//NetRatings AdRelevance AdAcross, for the period of August 2005 to July 2006, Sara Lee spent 52.3 percent of its advertising budget on network and cable television (see chart below).

Nielsen//NetRatings AdRelevance found that large food companies spent relatively small percentages on Internet display advertising (in this case, image-based impressions, which include popups, banners that scroll by, etc., but do not include sponsored search link ads or other types of Internet marketing). Altria, the parent company of Kraft, allocated 1.1 percent; Sara Lee spent 1.5 percent; while Heinz’s ketchup allocated 2.2 percent and McDonald’s spent 22.7 percent.

It’s hard to get specific numbers as analysts don’t break out food advertising separately from CPG advertising. JupiterResearch defines CPGs as food, beverages, alcohol, household products, cosmetics and beauty aids, and personal care products. Analyst Emily Riley of JupiterResearch says “CPG spending makes up only 5 percent of total online spending. Currently about 90 percent of it is display advertising such as banners, sweepstakes and sponsorships.”

However, JupiterResearch predicts that CPG spending will increase substantially in the next three years and that compound annual growth will be at 10.5 percent between 2005 and 2010 for display advertising, from $385 million to $632 million.

Aside from display advertising, what else are food-related companies doing online? Phillips says, “Food companies are still figuring out how to use the Web ” and they are definitely spending a lot of money trying to do it.” Online initiatives that attract, engage and retain users such as coupon and recipe downloads, features that foster community and sites that position themselves as information resources are among the most popular.

These bells and whistles seem to be effective ways to drive traffic. According to comScore Media Metrix, approximately 38.2 million Web users visited food sites in September – up 15 percent from last year. Comparing July 2005 with July 2006, Food Network.com had a traffic increase of 21 percent; AllRecipes.com is up 51 percent; and About Food increased by 44 percent. Many of these websites are e-tailers and are leveraging the Web with good results.

One of them is Omaha Steaks, which has been online since 1990 with CompuServe, then with its own site since 1995. Omaha Steaks’ communication director, Beth Weiss, says the online part of their business is the fastest growing and credits their aggressive affiliate campaign, which is run by LinkShare and had 2,800 active affiliates for the month of August 2006.

Weiss explains that as a direct marketing company, 97 to 98 percent of its budget is spent on things that go directly to the consumer, like sending catalogs and emails to their 2.2 million active customers who buy regularly.

“We do very little newspaper or television – only a small amount to promote for the holidays and we do no radio because historically it has not worked for us,” Weiss says. “Our target demographics are differently structured depending on where the customer shops. If they mail order or use the 1-800 number, they tend to be older; younger customers tend to be online. The thing that crosses over all the marketing channels is that because our products are high end, we market to affluent people ” they travel and read, and most are in their late 40s and above.”

What the Big Kids Are Eating

It seems that affluent people in their late 40s or older are the sweet spot for many high-end online food purveyors.

Richard Gore, president of Culinary Entertainment Group (CEG), says “food entertainment space” is driven by boomers who go to three-hour restaurant meals as an evening’s entertainment. “Boomers don’t want to stay out late to go to a concert; they have the money to spend, and they are much more interested in food than earlier generations.”

CEG’s March 2007 introduction of Food University – high-end cooking events with an accompanying website – is targeted at boomers. To reach boomers with an estimated split of approximately 60 percent female and 40 percent male in regions such as Chicago, Jacksonville, and Houston, Gore says they are using a mix of print, local radio and local cable, with “events like celebrity chef tours, where the public can mix with their favorite chefs, and provide companies involved with a huge array of experiential marketing opportunities. People see a product and how it’s being used, sample it and they’re hooked,” he says.

Food University, through a partnership with Wyndham Resorts, will engage the American public in learning how to cook more adventurous fare by providing access to celebrity chefs like Martin Yan and Sara Moulton.

Benefiting from this exposure to celebrity chefs are many high-end food purveyors, including two e-tailers, Cooking.com and igourmet.com. Both have realized revenue increases in the past year; igourmet.com’s by 50 percent. Marketing manager of Cooking.com Kari Taylor explains that “the popularity of celebrity chefs and food television has driven awareness and increased demand of cooking products”; some of their more popular products include high-dollar items like Zojirushi bread machines, Calphalon cookware and Capresso coffee machines.

Tracy Chesman, vice president of sales at igourmet.com, a purveyor of 700 cheeses and hard-to-find specialty foods such as Douwe Egberts coffee, says there has been an increased interest in gourmet foods due to the accessibility that consumers have to cooking media such as cable television and the Internet.

“We got a lot of increased traffic when Emeril was on the Food Network and talked about Maytag cheese,” Chesman says.

She adds that igourmet.com saw an increase in sales of a specific type of walnut oil when a magazine article recommended it, which showed the company there was a direct reaction from communication in the media.

The Search For Food

Both companies – igourmet and Cooking.com – credit affiliate marketing and search marketing as key drivers of their business. Cooking.com has an affiliate program run by Commission Junction and their top affiliates include eBates and Upromise.

igourmet.com has outsourced its affiliate program to outsourced program management company Pepperjam.com since 2000 and says that since its launch, sales have increased every single year.

“A huge part of igourmet.com’s success is due to the affiliates – who are essential,” says Michael Jones, COO of Pepperjam. Through igourmet.com’s LinkShare program, they can see that the amount of producing affiliates is increasing. Pepperjam says igourmet.com’s top “affiliates are loyalty programs like Upromise, Ebates, MyPoints and American Airlines AAdvantage, as well as the niche gourmet site, BacchusSellers.”

Jones adds that igourmet.com has very active and aggressive campaigns on Google, Yahoo and MSN and that search generates a large part of their business. Jones claims igourmet.com is the No. 1 listing for “gourmet cheese” and they “maximize campaigns organically on the natural listing through search engine optimization as well as through pay per click.”

Women In the Kitchen and Online

Both igourmet.com and Cooking.com say women make up the majority of their customers. For Cooking.com, their target audience is 35-to-65-year-old women with an interest in cooking, or empty nesters or mothers with younger children. The bulk of igourmet.com’s customers are mostly middle to upper class and clustered in metropolitan areas on the East Coast with a higher percentage of females (55 percent).

The 55 percent figure is in step with findings from comScore Media Metrix. They found that in July 2006, affluent females were the most popular demographic segment among food site visitors, with a 54.4 percent share.

However, vice president of research for BIGresearch, Joe Pilotta, warns that food companies should not jump to conclusions about who uses the Internet to shop for food. He said that in August 2006, BIGresearch did a survey of 15,000 people about the media influences for purchasing food and found that “the normal kind of intuitive thinking is not correct.”

Pilotta says that people who have a lower income use the Web a lot to comparison shop online before they go shopping. For example, a budget-oriented mother of young children will go online to check the food prices for items such as chicken and crackers at Safeway versus Albertson’s while preparing her shopping list before she gets in the car.

Many food sites are targeting Gen-Xers including CNET’s Chow.com, which is aimed at 25-to-45-year-olds, whom they believe are passionate about food but possibly not very skilled at preparing it. Chow.com, which launched in September 2006, includes the popular discussion boards of Chowhound.com and video tutorials on subjects like how to dice an onion, as well as recipes, restaurant reviews, party tips and coverage of food marketing.

SlashFood, a blog that is part of Weblogs.com, is another food site whose audience is primarily 25-to-45-year-olds. Sarah Gim, editor of SlashFood, says the site has easily built up traffic month-over-month since it launched in August of 2005. She says that their team of paid bloggers covers a gamut of topics, from food news to restaurant reviews to food culture, and credits the site’s popularity to the fact that “food in general is more popular than 10 years ago and many readers are motivated by issues concerning health.”

The Food Network is the most exhaustive example of a television and Web channel that has experimented with targeting everyone from foodies to newbies. The Food Network reaches 90 million homes in the United States and the core audience is 25 to 54, more female than male.

However, male viewers increase and the average age of viewers falls in the evenings, which is why shows that are similar to competitive sports, such as “Throwdown with Bobby Flay,” succeed. “Iron Chef” is one of Food Network’s most popular, attracting many from outside its normal demographic – in particular, the core 18-to-49-year-old male demographic.

In October 2006, a 20-part series and accompanying website called “Gourmet’s Diary of a Foodie” kicked off on PBS. It introduces viewers to exotic ingredients and in-the-know chefs on an international level. According to an August 2006 Nielsen Media Research poll, 38.7 percent of PBS viewers make more than $60,000 per household and 30.8 percent have a four-year college education.

So how can food marketers reach such a wide swath of users online – who range in age, gender, education and geographic location? Because of the abundance of websites, Jupiter’s Riley says “food companies typically use interactive agencies to plan their media spending for them. The agencies will often partner with well-known content sites using demographic targeting information.” While many food companies want to drive potential customers to their websites, Riley says the ultimate goal is to provide an engaging brand experience. Food companies seek to do this through a variety of interactive components.

Interactive Is On the Front Burner

One effective component that Sara Lee used for its “Soft & Smooth Whole Grain Wheat Bread” campaign was word of mouth, which was created by AllRecipes.com to reach mothers of school-age children.

AllRecipes.com, which also provided the campaign’s recipe feature, created a custom consumer panel where qualified home cooks were invited to try their new product for free. AllRecipe.com’s vice president of marketing and partner affairs, Esmee Williams, explains that “an invitation was advertised in areas of the site where influencers were most likely to spend time.” Influencers (members who submit content and share opinions) were asked to fill out a short survey; those who fit the defined target profile were provided with online coupons good for 70 to 100 percent off a loaf of the bread.

More than 15,000 people participated, most of them in the target market. Seventy percent of the audience downloaded the coupon, and 40 percent redeemed it.

“Those who agreed to participate in the ‘taste test’ panel were also provided exclusive access to a co-branded microsite where they could share their feedback, submit recipes utilizing the product as an ingredient or forward product recommendations accompanied by a product coupon to friends,” Williams says.

Many food companies have microsites, which create environments that foster a relationship between a specific brand and audience. Among the most successful is KraftFoods.com, which frequently has been the No. 1 branded food domain during the past five years. According to Jupiter’s Riley, it has become a full-fledged destination site with recipes that incorporate Kraft products to appeal to busy moms as well as community message boards where users can swap ideas, and which Kraft can respond to and monitor.

Paula Sneed, Kraft’s executive vice president of global marketing resources, said in her keynote speech at the DMA conference in October that interaction with customers is imperative.

“We need to talk to consumers to find out their underlying motivations ” to succeed, it’s all about customer insights,” Sneed says.

eMarketer’s Phillips says food companies read user-generated content in blogs and message boards “to see which way the wind is blowing before they launch a product – it is an online focus group that offers feedback.”

In October 2006, Kraft partnered with MSN to launch Chef to the Rescue segments, which are four-to-five-minute videos that can be downloaded on demand, so users watch them at their convenience. They feature celebrity chef Cat Cora creating meals based on recipes from KraftFoods.com and are a way that Kraft serves its target audience of time-crunched mothers. Sneed explains that this is “the type of next-generation advertising that adds value to its core customer.”

Kraft Foods, along with Masterfoods USA and Sheraton Hotels & Resorts are among the initial sponsors of Yahoo Food, a section that Yahoo launched in November that offers visitors recipes, food-related articles, blog posts, celebrity interviews and video.

Intended for sophisticates as well as casual cooks, Yahoo Food offers original and syndicated content including articles from the magazine Every Day with Rachel Ray, recipes from Epicurious, original posts from 13 food bloggers like The New York Times writer Ed Levine and video from Martha Stewart Living Omnimedia. The site also will include a Yahoo video show, “Cheap and Easy,” with clips advising users how to make dishes for not more than $5 in less than five minutes.

Diners Eat Up Video

Videos and webisodes are now de rigueur components of many food-related websites with the hopes that these elements will become viral. eMarketer’s Phillips explains that the goal is to have users find it authentic and pass it to each other, and says that today it is easy for companies “to post something on YouTube and see if it goes viral.” She says a great example that was sent to her is Smirnoff’s Tea Partay video, which is a send-up of a gangster rap song, set in Greenwich, Conn.

Another viral marketing campaign, “Long John Silver’s Shrimp Buddy,” is about a guy going on a road trip with a man in a shrimp suit. It has received good and bad critiques from online users, which exemplifies the dangers of viral marketing campaigns that lack credibility. One blogger wrote, “It’s the weakest viral campaign I have seen” and another criticized that “It’s about as genuine as Coke’s summer road trip commercials with a bunch of teenagers encountering spontaneous poetry reads and magic shows.”

Perhaps the most well-known viral campaign for a food company is Burger King’s Subservient Chicken site, which had a million hits within a day after being released, and received 20 million hits within a week. Users could control the movement of a man dressed up like a chicken by typing commands such as “do jumping jacks,” “dance” or “watch TV.” Joseph Jaffe explains that this type of engaging interaction with customers is incredibly valuable because it is more of an opt-in media versus TV, which is mass media that everybody sees. Jaffe says the average user of the Subservient Chicken site spent 7.5 voluntary minutes there. “That’s 15 30-second spots and I bet that’s worth 50 30-second spots because the viewer is engaged the whole time, he says.”

A Web campaign that includes a podcast or user-generated content requires the person to register and therefore guarantees interactivity. And by engaging with users, companies are building awareness and keeping their brand top of mind. Food companies like Burger King and Campbell’s Soup are not trying to sell Whoppers or cans of tomato soup over the Internet – they are trying to build online relationships with users with the hope that the brand experience will follow them off-line and make them brand loyalists. eMarketer’s Phillips says companies will use every interactive angle possible to engage with customers – from word-of-mouth campaigns, to ringtones, to sweepstakes, to advergames.

eMarketer’s James Belcher predicts that advergames and in-game advertising are “small but growing and important” and points to Microsoft’s 2006 purchase of Massive, a maker of in-game advertising, as proof of the momentum.

In-game advertising places targeted ads inside video games – such as on billboards as a player skateboards down a street – and serves different billboards to different users depending on their geography and age. The technology is now attracting deep-pocketed corporate sponsors who see video games as a great way to reach desirable audiences such as young males.

Sara Lee, department store Kohl’s and chip maker AMD are experimenting with in-game advertising with the sponsorship of a series of online games called “The Flushed Away Underground Adventure” that launched on AOL in October. The game called on players of all ages to solve a series of challenges that feature characters from the movie “Flushed Away.” Sponsors have an online presence in the games as well as plug their products in customized pre-roll video ads and banners.

Marketers will be interested to know that according to October’s comScore Media Metrix’s Game Metrix, a study that analyzes gamers’ cross-platform behaviors, 37 percent of heavy gamers agreed that featuring actual products or companies in games makes them feel more realistic, and half of heavy gamers believe that it is inevitable and will be in all or most games in the future. The study also found that video games appeal to not just teenage males or children – on average, gamers are 41 and have an annual income of $55,000; females account for 52 percent of the gaming audience.

A July 2006 report by the Kaiser Family Foundation, based on analysis of 77 branded food websites that are targeted at kids, found that 73 percent of the sites contained advergames, ranging from one to more than 60 games per site. McDonald’s Ronald.com has pages for kids to color, and Capncrunch.com, which promotes the Quaker Oats cereal, offers screen savers.

M&M’s has launched advergames designed for all ages. In October, they introduced the advergame “50 Dark Movies Hidden in a Painting,” which features a Brueghel-style painting with a series of visual riddles where players move around the screen and find the 50 movie titles represented by the characters in the painting.

Another advergame, the M&M’s Trivia Game, asks questions like, “Who drives the NASCAR M&M race car?” which for most users require them to search for the answers. Kevin Ryan, CEO of multichannel advertising agency Kinetic Results, explains that CPG companies like M&M’s are incentivizing users to search on their brand for the answers. “It is all about building an experience,” Ryan says. “It is not likely people are going to buy M&M’s online – they just want people to interact with the brand. It is a prototypical experience.”

The Search For Sustenance

Ryan believes, “There is a tremendous amount of opportunity in using search as a brand conduit ” it is the foundation for growth in the next couple of years,” he says. “There is a big value for search beyond direct response.”

Search is a very effective way of valuing and measuring the impact of investments in other types of media; for example, marketers can use search as a way of monitoring the effectiveness of a TV campaign, as they will see spikes in search activity immediately after the campaign launches.

Cam Balzer, vice president of strategy planning for Performics, agrees that search is helpful for branding efforts. He says that initially some food marketers and CPGs did not see the value in buying keywords if they did not convert, but marketers are starting to understand that consumers are not always looking for immediate gratification. “Marketers are realizing there is value in buying a keyword like ‘turkey’ because although a user might not be ready to buy a turkey at that moment, they might be searching on the word while they think about the kind of turkey to prepare for the holidays.”

Of course, some keyword buys do convert well. “Some of our clients are in the food-gifting business so they buy terms like ‘holiday pears’ and ‘holiday popcorn basket.’ Those words get costly but they convert very well and the high costs pay off. It is the direct market companies that leverage those,” Balzer says.

For the most part, it seems that food companies are just starting to realize the potential of search to engage their audiences. Balzer says, “A lot of food companies are strictly promoting their brand online and they need to reach beyond people who know about them to engage new consumers. For example, there are not many players for search terms like ‘healthy snacks’ or ‘healthy meats.’ Those words are not used by the household brand names like you would think and that is where the opportunity lies.”

Performics has worked with a meat-related food company and says that contextual targeting has performed well for building awareness of its product. Balzer says, “We have seen success with what they call ‘flavor conquesting,’ which means that one brand buys another brand’s keywords. For one client – if we were buying for a turkey product, we would buy ham in the content-targeting network so if someone is reading an article about ham sandwiches, the turkey ad pops up. We know the reader is interested in a similar food product [in this case a deli meat sandwich].”

Jupiter’s Riley says over the next few years, CPG spending on search “will grow a lot,” from $40 million in 2005 to $128 million in 2010, a compound annual growth rate of 26 percent. Search is by far the most lucrative area, accounting for 40 percent of the total online ad spending in the U.S., according to JupiterResearch.

For food companies to take advantage of search, they need to have good search engine marketing programs that are concerned with both paid and organic listings. Gary Angel, CEO of SEMphonic, a search engine marketing analytics consultancy, says, “Organic listings are an incredible value since they are essentially uncharged exposure. In addition, more clicks come from organic listings than paid; so organic listings are the No. 1 potential traffic source.”

Angel claims that paid listings provide coverage across a breadth of terms that can’t possibly be highly rated organically, scale programs to drive traffic beyond organic levels as well as allow companies to control the landing page and message given to consumers.

He says many companies have shifted significant resources into organic optimization in the last year – since this was an area that was significantly underutilized. He says that paid advertising really skyrocketed two years ago and has remained very strong – but many companies have essentially reached a plateau.

Online Offers Steak and Sizzle

Search is one of the channels through which Niman Ranch, a premium brand of meat, is acquiring new customers on a pay-for-performance basis. Niman Ranch pays its online marketing agency, LSF Interactive, only when new Web visitors buy – not for visitors that browse but don’t buy (leads) and not for existing customers that purchase again (repeat customers).

The comprehensive campaign includes search, email, banner advertising and comparison shopping engines such as Shopzilla and Yahoo’s shopping comparison tool.

Daniel Laury, CEO of LSF Interactive, explains that because they are compensated on a pay-for-performance basis, their job is to get the best conversion rates, which they do by tweaking the ad copy and landing pages and by fine-tuning their targeting. He says that recruitment through email and banners enables them to target users better.

According to Kinetic Results’ Ryan, companies have to foray into advertising on multichannels in order to reach audiences who are increasingly not only online but multitasking while they are online. Today people are on their computers instant messaging, while emailing and playing a video game. They have the television on in the background while they talk on their mobile phones. While they flip through the newspaper on the bus, they are listening to the radio or to their iPods. To reach these multitaskers, food companies have to develop campaigns that integrate several components.

An example of this is “Sara Lee’s Joy of Eating” campaign, which is being promoted on Sirius Satellite Radio’s Martha Stewart Living Radio channel and with an interactive presence on the Sirius website. The campaign also includes television ads, a Sara Lee microsite, online advertising, point-of-sale and visuals on packaging and bakery delivery trucks.

Some think that the Internet will never be a main channel for major food brands to reach customers. Datamonitor’s Productscan Online’s Vierhile believes that “There is no real compelling reason for consumers to visit food company sites except for recipes, which are really a one-off.” He believes that if anything has changed over the last 20 years, it is that food companies “have to get the products on the shelf.” To accomplish this, Vierhile thinks that food companies are focusing more on product packaging and in-store promotion.

In-store promotion includes free samples, shelf-edge talkers, in-store coupons, advertisements on conveyor belts, messages on the floor as well as in-store media on TV monitors. According to an August 2006 BIGresearch Simultaneous Media Survey of over 15,000 people, the top media influences for purchasers include in-store promotion – with the most significant influencer being coupons (see chart below).

A Mobile Feast

BIGResearch’s Pilotta says that “Coupons are still very effective even though approximately 1 percent are redeemed.” According to a Prospectiv October 2005 study, approximately 10.5 percent of consumers get their coupons from online sources, about 30 percent of consumers said they would like to receive coupons through online channels and more than half would like to receive coupons online if they were tailored to their interests.

A growing alternative to sending coupons inserted in newspapers is to send them in email newsletters. Email Data Source says that supermarkets that send email newsletters are successful in driving traffic to their Web properties. Supermarkets’ weekly newsletters offer specific targeting, can be personalized and include recipes, online specials and links to weekly ads.

Another innovative way for food merchants to deliver coupons and offers is through mobile marketing platforms including ipsh, VeriSign’s m-Qube, Motricity’s GoldPocket Wireless and MobileLime’s Mobile Rewards.

“Mobile advertising is better than online advertising – it is much more targeted,” says Bob Wesley, president and CEO of MobileLime. “The merchant can communicate with their customers before, during and after each purchase transaction, directly influencing buying behaviors at the point of sale. It is the ultimate in one-to-one communication because a person’s cell phone is a unique ID that is portable.”

For example, Chevy Chase Supermarket is using MobileLime’s Mobile Rewards platform to offer its patrons information-based alerts and instant savings on items store-wide through their mobile phones. Chevy Chase Supermarket was able to tell its customers that they were having a limited- time offer on Edie’s ice cream. This drove a large crowd of customers to stop by the store for the ice cream and also helped to increase loyalty sales on other items for which Chevy Chase sent alerts while shoppers were in the store.

In September 2006, Go-Tan, an Asian food brand, ran a marketing experiment in a supermarket in the Netherlands. Customers shopping in the supermarket (and anyone walking within a 100-meter distance) who had an open Bluetooth connection were reached by a contact request from the Go-Tan device about discounted Go-Tan products available in the store. More than 25 percent of Dutch mobile users leave their Bluetooth with an open connection, which means that Bluetooth could prove to be an appealing channel to establish direct and immediate communication with end users.

Food seems to be a natural match for the Internet. People love to talk about food and share food with others – and foodrelated sites are capitalizing on this social nature by offering various social media tools. It is predicted that food-related sites will continue to grow as interest continues – Yahoo indicated that they launched Yahoo Food because they saw it as a big opportunity and anticipate that CPG companies as well as health and diet companies will buy inventory in the section.

While the Internet is not the No. 1 channel for reaching consumers, most everyone agrees that it is vital for food companies to have an online presence. The KraftFoods.com URL is featured along with the 1-800 number on Kraft’s brand packaging, in their advertising and in Kraft’s Food and Family magazine. If food companies want to reach consumers with a multichannel campaign, Kraft Foods’ Sneed points out that all of the disciplines have to be integrated to maximize the potential for effectiveness.

For example, in 2006, Kraft Foods employed many marketing channels when they wanted to target Easy Mac macaroni and cheese cups to college kids instead of mothers. Kraft Foods used print ads, television spots and built a youthful and innovative website called Scam Some Mac, which includes short videos, an advergame and a viral element that lets you ask others to send you some mac & cheese.

Consumers can expect to see more pioneering online campaigns as food companies increase their spending on Internet initiatives in hopes of engaging users. With the growing amount of traffic to food-related sites, food companies will throw money at their online efforts although some will wonder if online exposure leads to off-line conversion.

Jaffe points out that people can tune out a television commercial with a remote control and ignore a magazine ad by turning the page, but to watch a video or participate in a sweepstakes online, users are required to register. Jaffe says that, “People are always trying to measure the value of an online campaign but maybe people should be trying to validate the value of an off-line campaign.”

In the end, it is finding an optimal mix of media, including Internet initiatives, which will move a company forward. Kraft Foods’ Sneed says, “Companies should not be afraid of trying new and innovation online campaigns – they need to be leaders, not followers.”

Your phone rings. A good friend is calling, more excited than you’ve heard her in months. “My book is on the home page of Amazon! I can’t believe it. My book was just published last week and already it’s on Amazon’s home page!” Exciting? Maybe not to someone who knows how Amazon works. Your friend has seen her book on her version of Amazon’s home page, but a closer look shows it under “Items Recently Viewed.” She views her book’s page each day to check any new reviews. Based on what books she looks at, Amazon thinks she’s very interested in buying this book and places it on her home page. But it may not be on anyone else’s Amazon home page.

That’s how personalization works. Each person sees something different even though everyone is looking at the same page. We’re used to seeing personalization on Amazon, but now it’s coming to a search engine near you.

Inside Personalized Search

So how can search be personalized? By showing each searcher different results. Just as Amazon shows different content on its home page for different people, a search engine can show different content on its search results page, even when two searchers look for the same keyword.

Why do this? Money. Personalization can be lucrative for search engines. If personalized results are more relevant results, then searchers are happier and search more. And if search marketers can target ads to the right people, they’ll pay higher per-click prices.

Search engines have personalized paid results for years, using geographic targeting. With geographic targeting, a furniture store, for example, that delivers within 25 miles of its location can purchase the keyword furniture but ask the search engine to show its ad only to searchers within the delivery zone. Search engines check the geographic location of the IP address for each searcher’s computer to decide whether it is within the geographic zone or not. Paid search marketers can set geographic limits on city or zip code boundaries, or sometimes even by longitude and latitude coordinates.

Search engines are now extending personalized search beyond geography. MSN Search pioneered personalization using searchers’ demographics; all search engines will eventually offer similar programs. With demographic targeting, search marketers can raise their bids for searchers based on gender, age or other characteristics. So, you can raise your normal per-click bid 3 percent for women over 65, if that’s your highest-converting market.

But how do search engines know which searchers are women over 65? They need searchers to tell them. That’s why Google, MSN, Yahoo and other search engines are racing to provide services that entice searchers to identify themselves. Whenever people register with one of these companies, they provide demographic information that the search engines can use to personalize searches.

In personalization parlance, demographic targeting is called explicit personalization, because it’s based on information explicitly provided by the Web user, such as age. Expect search engines to also engage in implicit personalization, changing search results based on searchers’ behavior, such as what kinds of Web pages they look at.

Implicit personalization may eventually prove more valuable than explicit personalization, because so much more information can be gathered. Search engines can observe which results people click when they search, discerning patterns that allow them to rank their favorite kinds of pages higher for all their searches. If a particular searcher regularly clicks product reviews rather than manufacturers’ specs, Google could begin to rank product reviews higher when he’s searching for product information.

Search engines have other ways of observing implicit behavior. Google can analyze the message text of its Gmail users to see what subjects they write and read about. Yahoo can look at the keywords used by its search toolbar users, and even see what pages they look at. You should expect search engines to use this information to personalize search, both for paid and organic. Search engines are always looking for ways to improve relevance – the match between searchers and content. High relevance means the search results correlate closely with what the searcher has in mind. For 40 years, search engines have improved content analysis to increase relevance. Personalized search concentrates on the people side of the relevance challenge instead.

Inside Personalized Search Marketing

Now that you understand the basics of personalized search, you may want to know how search marketing will change.

One change is obvious. Personalized paid search bidding is more complex, because search marketers must consider geographic location, age, gender and other demographics when they make their per-click bids. Instead of different bids for every keyword, now you need different bids for the same keyword.

You should raise your bids for targeted demographics only because they convert at higher rates. To bid effectively, your Web metrics system must track conversions by geography and by demographics, not just by keyword, and your bidding software must adjust based on those metrics.

Less obvious changes will confront us when search engines begin applying personalization to organic search. Search marketers have always wanted to achieve the No. 1 ranking for their favorite keywords. But what does it mean to be No. 1 in a personalized world? If the organic results are personalized, then different searchers get different No. 1 results. Your excitement at being No. 1 will be no more warranted than your author friend’s glee at making Amazon’s home page. In a personalized search world, every site can be No. 1 with some searcher sometime.

Widespread personalization will doom traditional rank checking. The question won’t be, “Does my site rank No. 1?” but rather “For what percentage of searchers does my site rank No. 1?” or “What was my average ranking yesterday?”

And who can answer those new questions? Only the search engines themselves. Only MSN will know where your pages ranked for every search performed with their search engine, so only MSN can tell you. Will the search engines provide that information for free or will they charge you for that analysis? Will search engines tell you the demographics of the referrals that come to your site? Time will tell.

Optimists also believe personalization will reduce the problem of search spam. The thinking is that spam is all about content, so that personalizing results based on searchers makes it exponentially harder to spam the search results (because spammers must then fake their content for many kinds of searchers). By increasing spammers’ costs for the same number of searchers, it takes part of the profit out of these unethical techniques.

No matter its effect on spam, savvy search marketers must stay on top of the personalized search trend – it’s the biggest change in search marketing since paid search. If you focus on who your best customers are, and you craft your content to match, you’ll be ready when the personalized search revolution breaks out.

They’re wired, they’re affluent and they are a largely untapped market. This prized group is teens. They are often referred to by a variety of different monikers including Echo Boomers, Millennials, Netizens, Generation Y, Trophy Children (because of the strong impact that parents have in their decision-making process) and Generation N (for Net).

When analyzing this group, market researchers often slice and dice things in slightly different ways, but one common thread among all the facts and figures is that the group’s size is on the rise and its spending power is awesome and undeniable.

Northbrook, IL,-based Teenage Research Unlimited (TRU) put the current U.S. population of teens (age 12 to 19) at 31.6 million. TRU says this population, which has increased steadily since 1992 as children of baby boomers entered their teen years, spent $155 billion in 2005.

Alloy Media says 10-to-24-year-olds are a demographic said to be 60 million strong with annual spending power of as much as $250 billion. Alloy expects the number of teens to reach 35 million by 2010, while Forrester Research says there are 73 million people under the age of 18 in the U.S.

JupiterResearch reports that teenagers spent over $158 billion in 2005 and are expected to spend $205 billion in 2008.

A recent Harris study reports that American kids, teenagers and young adults, aged 8 to 21 years old, have annual incomes totaling $211 billion and they are spending 81.5 percent of their earned income – a whopping $172 billion per year.

Younger kids, the so-called “tween” set between ages 8 and 12, spend $51 billion per year, according to Alloy (see sidebar, page 58).

Futurist Jim Taylor, vice chairman of the Harrison Group, says boys under 18 have an average of $525 to spend each month, while girls have $430.

U.S. teens controlled an estimated $169 billion in disposable income last year – or $91 per week per teen – according to a study by TRU.

So where do these kids get their money? The major sources of teens’ income are: parents on an as-needed basis (47 percent); odd jobs (41 percent); gifts (41 percent); parttime jobs (28 percent); regular allowance (25 percent); and full-time jobs (11 percent), according to TRU. The average young consumer spent $84 per week. Some $57 of that was their own money, while they received the remaining $27 from their parents.

And unlike kids of the past, they are free to spend; 22 percent of U.S. teens have credit cards while in high school.

Getting Hip to the Kids

But this group is hard to get a handle on. Maybe that’s why researchers have devoted a lot of effort to trying to understand this highly coveted group. Here are some basic things you need to know about teens.

They are very wired and likely to stay online for longer periods than adults.

They are more likely to access the Internet from different locations.

They participate in a wider range of online activities.

They are more likely to adapt quickly to new technology, and embrace its changes.

They multitask while online.

They are fickle and not necessarily brand loyal.

They are savvy and often distrustful of traditional advertising methods.

No other age group matches teens’ enthusiasm for the Web or their use of broadband connections. About 21 million or nearly 87 percent of the 12-17 age group is online, many at least twice a day, according to a recent Pew Internet & American Life study. That’s more than the activity of 25-to-29 year olds, which have an 85 percent penetration. And 49 percent of teens have high-speed connections at home. That’s more than any other age group.

A Burst Media survey from June of 2006 reports that 69 percent of Web users (13 to 17 years of age) said if they had no Internet access outside of school it would “ruin” or make their day “not as good.” Bummer, dude. Among teens who go online from home, friends’ homes, libraries and other locations outside of school, more than one-third (37.4 percent) say they spend three or more hours per day on the Internet.

Teen males are more likely than teen females to say they spend three or more hours per day on the Internet – 39.9 percent versus 34.7 percent. Additionally, nearly one in five (17.9 percent) say they spend between two and three hours online; one-quarter (25.1 percent) say they spend one to two hours online; and 19.6 percent say they spend less than one hour per day online outside of school.

“Corralling these distractions to minimize their disruption is a significant challenge for marketers,” Chuck Moran, Manager of Market Research for Burst Media, says. “Marketers should use the Internet to create a central content point for teens on a variety of subjects and interests. By doing so marketers can then develop integrated marketing campaigns with advertising creative and programs referencing a central platform and working in tandem to get teens’ attention.”

One way to do that might be look to the growing popularity of social networking sites. Three out of five (61.4 percent) respondents in the Burst Media study had visited a social networking website. Of those, 60.7 percent joined the site and created a profile. Teen females are significantly more likely than teen males to say they have visited and joined a social networking site (67.5 percent versus 53.7 percent).

And MySpace leads the pack when it comes to social networking. From April 2005 to April 2006, the overall number of teen visitors (between the ages of 12 and 17) to MySpace grew from roughly 3 million to 7.8 million. That was up 162 percent, according to comScore Media Metrix. MySpace currently has approximately 85 million members.

Like Google, MySpace has spawned a cottage industry of sites that provide support and services to teen subscribers. Sites like MyGen.com.uk, Coshed.com and Poqbum.com, help kids create profiles, layouts, graphics, games, icons and quizzes for MySpace blogs.

But once something gains popularity there is usually some backlash – MySpace has drawn fire from parents and teachers – and now many teens are looking to newer, edgier social networks, such as Bebo.com, Tagged.com and MyYearbook.com. Tagged.com grew to half a million teen visitors in April 2006, from a virtual unknown, according to Nielsen//NetRatings. Also a newcomer, MyYearbook.com blossomed to 1 million visitors over the last year.

Marketers value these virtual communities for a number of reasons: They attract a very specific target audience; visitors return again and again; they provide a place to promote and sell products; it’s fairly easy to collect demographic and product- use information; and they provide a place to interact one-on-one with teens.

However, it’s not going to be easy for affiliates to crack.

“It’s an interesting market opportunity that has everyone salivating,” Blagica Stefanovski, affiliate program director at PartnerCentric, says. “But it’s difficult for affiliates to make headway on those social networking sites like MySpace or FaceBook. I think an affiliate would need to have a niche site that caters to teens or be a MySpace superstar with a large network of friends. It’s going to be hard for affiliates to get credit for driving registration and sales in that environment.”

She adds that there is significant opportunity for merchants on social networking sites as long as the merchant can get all 0f its divisions on the same page to drive success.

Consultant Shawn Collins agrees that it’s difficult to acquire teen-centric affiliates. He found this out in his role as the affiliate manager for Payless Shoes, which has several lines of shoes geared toward young women and teens.

“I tried to reach out but there were not a lot of savvy affiliates for the market,” he says. “Most teens aren’t serious affiliates or aren’t taking it as seriously as people who do it for income. They are not as diligent and business like. Also it’s a hard market to crack according to Collins, because it’s so community oriented and many of the popular online communities don’t do performance ads just CPM ads.

Teens also use such social gathering spots like MySpace to talk music. That means the social network is ripe with independent bands promoting free MP3s. But other music sites are also feeling the beat. Apple.com, for example, increased its teen visitor base by 68 percent to 3 million from April 2005 to April 2006, according to ComScore. A study by the Pew Internet & American Life Project reports 47.1 percent of teens download music (see Music story, page 68).

That same study from Pew also reports nearly half (49.3 percent) of the respondents play online games, which provide marketers with a great vehicle for keeping kids in the marketing loop with integrated product promotions called “advergames” (See video gaming story, page 74).

Another thing that teens love to do is talk, and online communication reigns as the preferred method of chat. A recent Lycos survey showed that once the school day ends, 45 percent of the teens surveyed preferred to communicate via Instant Messenger (IM) outside of school. Although public teenage chat rooms have become stomping ground for spammers and other unscrupulous prowlers, legitimate marketers can still be heard above the din.

And when they are not chatting online, teens are talking on their cell phones. In fact, 70 percent of teens own a cell phone. Many claim that creating online branded content for teens or reaching young buyers through their cell phones is the way of the future.

“Seen as the next frontier, mobile marketing appears to infiltrate teens at a rate much higher than adults,” a Forrester report says. In addition to buying ringtones, Web-enabled phones will make it possible to watch video clips and shop via cell phone.

And while the average teen spends seven hours a week on the Net, they spend 10 hours a week watching TV, a difference more pronounced than for online adults, according to JupiterResearch. Many suggest that a multichannel mix of online and television would likely reach the teen population.

Blogging is also something that has captured the attention of teens. More than half of all teens and 57 percent of teens who use the Internet have created a blog or Web page, according to Pew Internet & American Life Project. The most active segment among teenage bloggers is girls aged 15 to 17. One-quarter of online girls in that age group blog, compared to 15 percent of online boys of the same age, the study says.

But blogs can be tricky territory for online marketers because many blog sites are owned or run by individual users. These sites are often highly personal journal- based pages that are updated with no regular schedule and subject to the whims and opinions of the users. Many don’t even accept advertising. All this combines to make them a less attractive opportunity for marketers.

Hook, Line and Sinker

Many industry watchers characterized teens as fickle, cynical and not particularly brand loyal.

That’s a claim Forrester Research analysts dispute. “Although they admit to shopping around before making a purchase, more than half of both younger and older teens agree that when they find a brand they like, they stick with it,” the Forrester report says.

However, when it comes to trends and what’s new – the brand is not the issue – it’s all about what’s hot at the moment.

Still, for the most part, teens are incredibly marketing savvy and by the age of 19 the average teen has seen roughly 300,000 advertising messages, according to Peter Zollo, author of Getting Wiser to Teens: More Insights into Marketing to Teenagers. Zollo is also co-founder and president of market researcher TRU.

To cut through the clutter-marketers need to develop marketing that doesn’t seem like marketing, according to Boston College sociology professor Juliet Schor, author of Born to Buy: The Commercialized Child and the New Consumer Culture.

And while there are some common traits among teens, observers note that teens are profoundly accustomed to marketing and they can easily detect messages that are less credible. Most say resorting to stereotypical images will backfire. There needs to be a keen understanding of teen culture to develop messages that resonate with them. Marketing to teens is all about inspiring positive involvement. That takes clever creative and a commitment to delivering value.

“It’s important to speak the right language and use the right people,” Ron Vos, founder and CEO of Hi-Frequency Marketing, a street marketing company, says. “If you stay true to their culture, it can be very effective.”

Parry Aftab, executive director of WiredSafety.org says marketers tend to approach teens in one of two ways. “Either they treat teens as kids, in that they should do what they’re told, or they treat them like smaller versions of adults, in that they assume kids have the same values as adults,” Aftab says. “Neither approach works with teens.”

Because teens are especially adept at avoiding advertising through the use of pop-up blockers, marketers have gotten more creative in their delivery of their messages to this younger audience, according to a report by Forrester Research that highlights advergames, instant-win games, online coupons, streaming video ads and cell phone promotions as things that work with teens.

Under the Influence

Teens have already been identified as music influencers and often the primary decision makers for consumer electronics purchases within their family’s household, according to Jupiter Research. But the real key to connecting with teens is to find the influencers within their peer community. The Jupiter report revealed that 17 percent of the online teens would qualify as highly active online “influencers” who spend roughly eight hours per week on the Internet, engaging in the broadest range of activities. More than half (53 percent) of the influencers are girls who actively shop and spread the word to friends about trends and products.

That’s why viral marketing and word of mouth seem to be working. A recent study from eMarketer says, “For the most part, it works. Teens are active users of viral marketing tools like forwarding video clips to friends, using ‘e-mail a friend’ links, and sending e-greetings. They use tools like ‘e-mail a friend’ links on retail sites, wish lists, and IM when shopping to get purchasing help from friends.”

Often marketing companies, such as Hi Frequency Marketing, will use an extensive network of teen influencers who are rewarded for promoting brands to their friends and acquaintances. But that can backfire if the promotion is uncovered or deemed fake.

Still some claim too many teens exhibited concerns that companies would steal their friend’s emails if they used a “forward to a friend” feature common in many viral marketing campaigns. Teens have also expressed concern about cluttering up friend’s inboxes as well as a reluctance to waste their friends’ time by forwarding jokes and other things found on the Net.

Instead, Vikram Sehgal, research director for JupiterResearch, recommends search engine marketing as an effective tool in reaching this age group.

Google is already part of teens’ online routine. According to comScore, Google got a rise from teens in the last year as the number of teen visitors to Google jumped 24 percent to 10.7 million from April 2005 to April 2006 (see sidebar, page 54).

The comScore report states “it’s clear that there are benefits to providing realtime inventory information to sites like Google when it comes to capturing young consumers. They’re three times more likely to use Google to find local businesses than online yellow pages from a phone company.”

According to a study by A Couple of Chicks Marketing firm, the younger generation is very patient when searching. Fifty-three percent of those surveyed by A Couple of Chicks say they go to as many pages as they need until they find the answer, with only 18 percent sticking to the first page. With 79 percent of the teens stating they have never clicked on a sponsored ad, most said they believe most of what they see on the first page is some sort of advertising – whether it is not.

Other findings from that report showed Expedia has clearly done the best job of building their brand with Gen Y. Over 56 percent of the respondents said their families had booked a vacation on Expedia. Hotels.com came in second at 28 percent. Identical statistics were cited when asked if they had ever visited any travel sites. From a marketing perspective, teens were not at all familiar with Travelocity, Priceline, Hotwire or even the ability to book travel on Brand sites. The survey concluded these habits will have an influence on future purchases as this group ages and begins to book their own travel.

Getting to customers early is what many are shooting for. In April, Toyota started a campaign to promote its Scion car in an unusual place – Whyville.net an online community that caters to 8-to-15 year olds. These kids can’t reach the pedals, let alone buy the car. The hope is that they will influence their parents’ purchase or grow up and have some brand loyalty to Toyota.

Toyota claims that just 10 days into the campaign, the word “Scion” was used in Whyville.com’s online chats more than 78,000 times; hundreds of virtual Scions were purchased, using “clams,” the currency of Whyville; and the community meeting place “Club Scion” was visited 33,741 times. These online Scion owners customized their cars, drove around the virtual Whyville and picked up their Scion-less friends for a ride. Cadillac has used similar tactics and incorporated its cars in a game for Microsoft’s Xbox.

What some say works is to reverse the marketing process from aiming for awareness to achieving shared network respect. Let teens have an influence in shaping your brand’s identity. Build trust with teens by using words and images that make your website feel like a place (a destination or world); create friendly characters that encourage kids to identify with products and companies; develop Interactive games and activities that get kids to return; develop clubs that teens can join; offer contests, quizzes and brand-related games; and use bold graphics.

Just remember there are a host of issues to consider when dealing with highly impressionable teens. Parents are clearly worried about internet access exposing their children to sexual predators, to values they do not agree with or to ideas that their children are not ready to see or understand.

A nationwide poll conducted by Common Sense Media in 2006 found the No. 1 media concern for parents has shifted from television to the Internet. Currently, 85 percent of parents say the Internet poses the greatest risk to their children among all forms of media, compared to 13 percent who consider television the biggest risk.

So, if you don’t want parents to use parental controls to block your site, be sensitive to what might be considered parental concerns and that way you’ll keep the parents happy and the kids coming back.

Back-to-School promotions can lead to big bucks if online marketers start early.

Back to school is a big deal for affiliates – it kicks off the part of the season between June and January where many earn the majority of their annual revenue. The overall “back to school” season refers not just to shopping for kids in grades K through 12, but other spending periods including “back to college,” new fall wardrobe, family vacations and sending the kids off to camp. Many affiliates find it second only to the holiday season in terms of sales.

Traditionally, many people consider the back-to-school (BTS) shopping season as a week or two before school starts in August and September. But according to a July 2005 National Retail Federation (NRF) report, 16 percent of consumers start their back-to-school shopping at least two months before school begins and 45 percent begin shopping between three weeks and a month before school starts. With school start times creeping back to mid-August and even earlier in some states (such as Hawaii), it would benefit merchants and affiliates to start their back-to-school efforts as early as May or June.

Chris Henger, vice president of affiliate marketing for Performics, suggests, “Merchants should initiate programs in early June – that is when placements should be secured.”

Irv’s Luggage, which sells backpacks and bags for back to school, starts its season in June. Mary Beth Padian, senior director of Upromise, an affiliate that is partnered with over 430 online retailers, says “most of the merchants we work with start their BTS promotions during the first and second weeks of July.” For example, OfficeMax starts its BTS season in July and Payless Shoes starts their efforts off-line and online in mid-July.

Overall Market

In August 2005, the retail researcher NPD Group predicted overall back-to-school spending would rise 1.4 percent over 2004. They estimated consumers were planning to spend $372 per child this year, up from $367 last year.

The NRF had a higher prediction. The August 2005 Back-to-School Consumer Intentions and Action Survey, conducted by Ohio-based market intelligence firm BIGresearch, found that families with school-aged children would spend an average of $443.77 on back-to-school items. It estimated that for K-12 students, back-to-school spending would see sales of $13.4 billion.

The NRF 2005 Back-to-College Consumer Intentions and Actions Survey, also conducted by BIGresearch in August 2005, predicted that college students and their parents were planning to spend 33.8 percent more in 2005 than in 2004 – a whopping $34.4 billion on returning to campus this year.

The $47.8 billion combined predicted spending on back-to-school and back-tocollege merchandise falls behind the Christmas/winter holiday in terms of seasonal sales. Total consumer spending for the 2005 holiday season was $438.6 billion, according to the NRF.

School Supplies

What items are included in back-toschool shopping? In August 2005, NPD Group predicted that the best-selling items would be apparel, school supplies and footwear. According to the chief industry analyst of NPD Group, Marshal Cohen, denim would top the list of mostpurchased apparel item.

For back-to-college merchandise, BIGresearch predicted that spending would rise in all tracked categories; they forecasted that parents and students will spend $11.9 billion on textbooks, $8.2 billion on electronics, $3.0 billion on school supplies, $5.7 billion on clothing and $2.0 billion on shoes.

Shopping Online

So how much of back-to-school shopping occurs online? The 2005 NRF survey found that 32 percent of back-to-school shoppers plan to shop online and that number is expected to grow. One of the main reasons, explains Phil Rist, vice president of strategy for BIGresearch, is that “many store-based retailers are expanding their online offerings ” in many cases, creating broader selection online than they carry in their stores.”

The 2005 “Back to School Shopping Survey” from AOL’s InStore, conducted by Digital Marketing Services, reported higher online spending than the NRF. Parents anticipate spending nearly half of their back-to-school shopping budgets online; 53 percent say online shopping makes back-to-school purchasing easier. The survey also found that most shoppers (58 percent) prefer to research their purchases in advance, as opposed to making impulse buys (42 percent).

Targeting Teens

With the projected growth of back-to-school shopping online, online merchants and affiliates should prepare accordingly. Given teens’ growing number and purchasing power, it makes sense for merchants and affiliates to reach out to them online.

In fact, Web merchants, responding to a June 2005 survey sponsored by the online trade publication Internet Retailer, found that the third most frequently cited growth driver was the growing buying power of today’s Web-savvy teens and young adults.

Jeffrey Grau, senior analyst for eMarketer and author of February 2006’s “Retail E-Commerce: Future Trends” reports that, “Credit goes to a cadre of digitally literate young adults who are replacing older Internet shoppers in the e-commerce marketplace.”

A 2005 report by Pew Internet & American Life Project detailing a survey conducted in 2004 found that 87 percent of American teens age 12 to 17 used the Internet, up from 73 percent in 2000, and found that 43 percent of teens who go online purchase items.

One opportunity to reach teen and young adult consumers is for marketers to take advantage of their inclination for using consumer electronics and entertainment devices and for visiting websites about gaming (see story page 74). According to a 2005 Forrester Research report, over 90 percent of consumers age 12 to 21 in the U.S. and Canada own a gaming device and 75 percent play online and off-line games on their PC – marketers could integrate ads about back to school into the games themselves.

In addition, marketers would be wise to advertise about back-to-school shopping on a variety of websites. Young consumers spend more hours per week on the Net than adults, and Forrester found that almost 80 percent of teens visit game sites, almost 50 percent visit movie sites, and over one-third visit music sites.

Social networking sites are another opportunity for merchants to reach teens and young adults. Debra Aho Williamson, senior analyst for eMarketer, says, “Teens are the consummate word-of-mouth consumers; they discuss their likes and dislikes in blogs, text messages and posts on social networking sites. There are two caveats, however. The atmosphere is freewheeling and merchants may need to cede some control over their brand image. The other caveat is that teens feel no qualms about exposing a company if their motives seem suspect.”

Of course, another core audience for back-to-school promotions is the parents of school-age children. AOL’s InStore’s Back to School Shopping Survey found that parents plan to spend 47 percent of their back-to-school shopping budget online.

Affiliates may want to reach out to men in their 30s and 40s (fathers of school-age children) because AOL’s InStore’s survey found that fathers plan to spend nearly 25 percent more money on back-to-school shopping than mothers – an average of $336 compared to $270. It also found that fathers are more lenient, allowing their children more freedom to shop on their own and influence final purchases. The survey also found that dads expect to do more than two-thirds (68 percent) of their back-to-school shopping online compared to 42 percent of moms.

Be the Teacher’s Pet

Merchants are finding that in addition to parents and teens, teachers make a good target for back-to-school shopping promotions. According to a 2004 study conducted by Quality Education Data, each year, teachers in the U.S. spend more than $1 billion of their own money on classroom supplies. The study found that only 40 percent of the money spent on classroom supplies in this country is provided by school districts; 60 percent of those supplies are purchased by individual teachers for their own classrooms.

John Serpa, president of Maps.com, says, “Maps.com’s product mix has found that teachers are the core back-to-school audience. It has been reported that teachers spend an average of $458 per year of their own money to purchase bulletin board and other classroom-type materials, so our promotions are geared toward teachers.” It seems to be working, as Maps.com has realized a 38 percent increase in sales in August 2005 over August 2004.

Sally Graham, senior manager of ecommerce for OfficeMax, says “teachers and those who are college age are seeing OfficeMax as the place to shop for back to school.”

What Sells

According to Craig Cassata, president of Mr. Rebates, “There is a whole multitude of back-to-school items that are top sellers such as the obvious products like school supplies (pens, paper, etc.) but we’ve seen a marked increase in laptop sales before school as well as a good amount of apparel and clothing sales too.”

Although eMarketer’s Jeffrey Grau does not have the numbers to quantify it (because merchants tend to only break down their Christmas holiday numbers), he believes that the apparel and accessories category makes up the lion’s share of BTS shopping. A February 2006 comScore Networks report found that sales for apparel grew 41 percent in 2005 from 2004. According to a June 2005 survey by Internet Retailer, 23 percent of respondents believed that the apparel and accessories product area would see the greatest growth in online sales in the next five years.

AOL’s InStore’s Back to School Shopping Survey found that the No. 1 backto- school item parents plan to purchase online for their children is apparel, followed by books, with accessories and computer equipment tied for the No. 3 position.

However, it seems consumers still have doubts about buying apparel online. An August 2005 Gallup poll, which surveyed 7,000 adults, found that over threequarters prefer to buy clothes in stores rather than online – only 9 percent said they preferred to shop online for clothes rather than in stores for reasons such as concerns about the fit and shipping costs.

Affiliates who sell apparel might do well selling items that are trendy for fall and/or are “hard to find.” Michelle Madhok’s SheFinds.com is an affiliate site for fashion and shopping whose audience skews toward younger women including college students. She says her site has “an advantage over the magazines of being able to jump on the trends – if there is something that is really hot – we will bubble it to the top so people can get it before it is gone.”

Examples of apparel that can be hard to find or are very trendy are specific brands of jeans. Right now, Angelina Jolie is making JBrand jeans very popular but they can be hard to find in Peoria. So people tend to buy denim online, and for this reason, SheFinds.com puts out a denim guide in time for fall fashions. “We don’t do as well with stores [merchants] that have an off-line presence. For example, I have heard that people print us out and go to the Gap off-line,” Madhok says.

Another potentially lucrative back-toschool area for affiliates is selling electronics to teens and college students. According to NRF’s Back to College survey, the average freshman, moving away from home for the first time, plans to spend $1,151.68, with a big chunk of that ($540.35) on electronics.

“There are three items no self-respecting 21st-century teen wants to be seen without: a mobile phone, an iPod and a computer. Back-to-school shopping lists will no doubt include these items,” says eMarketer’s Williamson.

In August 2005, the NRF predicted that although 44 percent of consumers plan to purchase electronics for back to school, the average spend was expected to fall to $68.08, compared with $101.03 in 2004. However, in October 2005, market researcher IDC found that strong back-to-school sales helped boost sales of mid-tier vendors, including Apple, Gateway and others. In June 2005, HP introduced a new back-to-school PC and monitor with new features, lower price and one full year of technical support.

Additional evidence that suggests electronic sellers are doing well: Circuit City reported that results from their second quarter of 2005, which includes June, July and August, were up 7.1 percent to $2.42 billion from $2.26 billion in 2004. (Circuit City does not break out off-line and online sales.)

Textbooks are another strong online shopping area, particularly for students heading off to college in the fall. “Parents who once browsed the shelves of a used bookstore will definitely be able to find the same great deals online,” says Williamson.

The National Association of College Stores Foundation sponsored a Student Watch’s study of 16,000 students at 21 campuses. It reported that 23 percent of textbooks college students purchased are through the Internet, up from 16 percent in 2004. The study showed that 61 percent of students who shop online chose that route because they could find books at bargain prices.

Dustin Rideout, manager of online marketing for AbeBooks.com, says, “The market has rapidly developed in the last few years. August and September plus January have become the peak seasons for book sales ” period. All of that is driven by the increased sales of textbooks on our website.”

Getting on the BTS Bandwagon

Making the most of the narrow promotional window for back to school is crucial. Performics’ Henger explains that the first step in planning back-to-school promotions is to make sure that marketing messages are coherent – he says that merchants need to keep creative and messaging consistent from a branding perspective. “A multichannel marketer like Sears has a back-to-school marketing strategy that permeates all channels. There is a consistent theme in all advertising channels – free-standing inserts (FSIs), television and online advertising.”

Stacy Ferguson of affiliate Upromise says, “Starting in early July we combine a unique and customized mix of on-site, in the form of a BTS page and themed banners; offsite, which includes direct mail to a million members with children under 12; and weekly and monthly BTSthemed emails. These are personalized to reflect our members’ personal preferences and interests.”

AbeBooks.com’s Rideout explains, “We work hand in hand with the marketing department and have developed other offline promotions solely focused to the student demographic. We employ large on-campus direct marketing campaigns, which includes street teams, collateral, contests, etc. We also have a dedicated student area called Textbook Central, which includes lots of other resources and information for the student textbook buyer. The majority of our campaigns focus on promoting this micro area of our website.”

Some savvy merchants set up ad groups specifically for back to school, according to Renee Silverman, marketing director of Irv’s Luggage.

“We set up, with ad copy that has our ‘back to school’ offer in it,” Silverman says. “The keywords that we associate with these ad groups are given special source codes that identify which ad group they are from. When the sale is made, we can easily see from the source code which keyword and ad group the sale came from. We keep track of this closely so that we can determine when to raise or lower bids on certain keywords, based on their performance. It’s a bit tricky because the average order is smaller for ‘back to school,’ so the spend can easily surpass revenue (and lead to a diminished ROI) if we don’t monitor closely.”

Mr. Rebates’ Cassata, one of Irv’s Luggage’s top affiliates, says, “Usually, a merchant like Irv’s would highlight their best sellers for a seasonal marketing opportunity within their affiliate email newsletters. For example, they would give the creative and linking code for a Jansport backpack so that it is easy for an affiliate to place onto their site or into their content management system.”

And if that’s not enough, there are always incentives, according to Henger. “As a way to boost affiliate sales during the back-to-school season, retailers consider exclusive offers for the affiliate channel; for example, making a promotional code only available to affiliates and not using that code in other channels. Obviously affiliates love these types of promotions as it gives them edge in converting sales – it gives shoppers a reason to buy through the affiliate site.”

Henger suggests retailers consider “incenting” top producers through a special bonus or commission, noting that many super-affiliates warrant premium pricing because of the high volume they drive. For example, a retailer might have a 5 percent commission rate (revenue share) for their affiliates but they may pay some top producers an extra 1 percent. Some large affiliates have slotting fees or other premiums available to merchants who want to optimize sales during the back-to-school season.

OfficeMax runs an affiliate program that rewards its top affiliates. Megan O’Donnell of OfficeMax says “with some publishers we may provide additional cash back during this time frame or additional bonus miles or bonus points for the loyalty sites.”

No Excuses

Given the range in products and audiences, there is no excuse why the majority of affiliates don’t tap in to the more-than $40 billion back-to-school market. Over the past year, studies have found that there has been an increase in the amount of money spent on back-toschool shopping and more parents are shopping online for back-to-school items. Affiliates that cater to teens, college students, mothers of nursery school kids, fathers of elementary school kids, and teachers can all get a piece of the action selling items that vary from fall fashions to the latest computers.

Because retailers are launching more products specifically for the audience and time of year, the value of affiliates will increase as online merchants look to their affiliates as one of their core strategies for sales. But affiliates do need to start as early as June to maximize their returns and prepare their promotions accordingly. Communication with affiliate managers is imperative to take advantage of relevant product promotions and to ensure that they are receiving maximum payment, if warranted.

ALEXANDRA WHARTONis an editor at Montgomery Research Inc., Revenue’s parent company. During her four years at MRI, she’s edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS).

Making a match can lead to big bucks if you know the rules of affiliate courtship.

Although Blake Killian is a Christian and believes there are benefits to Christian dating, he is forthright that the motivation behind his two websites, ChristianDatesOnline.com and Christian-dating.com, was purely financial.

It was the serendipitous result of some research of online dating keywords he was doing for his day job as an Internet marketer at Voodoo Ventures. Killian noticed that the search volumes for Christian dating keywords were really high but the bids were affordable. So, in March 2005, after committing himself to stop if he was losing money, he put together a website that reviews online dating sites and includes affiliate links on it. Initially he spent 20 to 30 hours per week. Now, a year later, he works on his sites about five to 10 hours a week and the monthly net profit is only $100 short of paying his entire mortgage payment every month.

“I knew there was money to be made. It has taken a lot of hard work since March but now the site is rolling. I love my job,” the 24-year-old New Orleans resident says. Is he experiencing beginner’s luck or is there still money to be made in online dating?

Super-affiliate-turned-author Rosalind Gardner, who famously made $436,797 in one year as an affiliate for online dating services (Sage-Hearts.com), started back in 1999 and continues to do extremely well. She says that although the current environment for starting an online dating site is “pretty complex,” nearly anyone can be making money today if you’re using Google AdWords. “There are still keywords and keyword phrases out there that people haven’t picked up on yet,” she says.

Even though online dating is vast – according to Publishers Association/comScore Networks, it represents the second- largest category of paid content online after music and video downloads – the boom years appear to be over.

In a JupiterResearch 2006 survey of 2,000 consumers online, the percentage of online users who visited dating sites in the last 12 months grew slightly from 2005 to 2006, while the percentage that posted online personal ads and subscribed to dating sites fell marginally during the same period.

A 2005 JupiterResearch report predicted that the industry would grow 9 percent to $516 million in 2005, down from 19 percent growth in 2004 and 77 percent in 2003. According to eMarketer, the overall market is often pegged at over $1 billion if ad revenue for the free portion of online dating sites is included.

Most experts agree that this decrease is just the beginning of a cooling of the market as opposed to precipitating a larger drop. Nate Elliott, an analyst for JupiterResearch, says, “We see continued growth for the next five years but it is plateauing – the rate at which consumers are subscribing to dating services online is flat. As a result the revenue growth is not going to be as high as it was.” James Belcher, an analyst for eMarketer, says, “I don’t see things shrinking in aggregate.”

Most experts agree the market is mature and headed for consolidation.

“I think there will be fewer sites. There will be some consolidation – you won’t have 15 versions of JDate.com. I think some of them will merge or fade away,” Belcher says.

“The market is saturated; you have all of the online dating sites you’re ever going to need,” notes Elliott.

One area that is thriving is “adult” dating sites – such as AdultFriendFinder, IWantU.com and SexSearch.com. According to Nielsen//NetRatings, traffic to AdultFriendFinder, the most visited adult dating site, rose 67 percent in January from a year earlier. Prices for these sites are comparable to traditional dating sites – most are in the $20 to $30 range.

Options for Increasing Revenue

For years, online dating sites relied upon significant growth in unique visitors to drive revenue. Nowadays, JupiterResearch’s Elliott believes that revenue growth is being driven by higher monthly rates rather than increased membership. Due to the slowdown in unique visitors, dating sites are faced with either improving their conversion rates or increasing the value of each customer.

Sites need to convert more visitors to paid subscribers to keep revenue growing. A 2006 JupiterResearch report found that only one-third of those who go to dating sites sign up for membership. This is the first time JupiterResearch has seen a drop in conversion rates since it began tracking the space in 2003.

Another way for sites to develop revenue is to increase the value of each member – sites are charging higher monthly subscription costs and are encouraging subscribers to maintain their memberships for long periods of time. Yahoo! Personals recently raised its one-month subscription price by 25 percent, and its six-month subscription price by 50 percent. Many of the more expensive sites justify their price by offering advanced services such as privacy enhancements, personality tests and security checks.

Increased prices, however, even those for premium features, seem to be backfiring. “Rising prices have kept a large number of users from converting to paid subscribers ” 37 percent of visitors who don’t convert say dating sites cost too much, making it their leading complaint,” explains the 2006 JupiterResearch report.

Another challenge the online industry is facing is a high level of dissatisfaction among users. Thirty-five percent of online daters were somewhat dissatisfied or very dissatisfied with the sites and only 29 percent were somewhat satisfied or very satisfied, according to a 2005 JupiterResearch report.

A 2005 Keynote Customer Experience benchmarking study found that the most common frustration reported by customers stemmed from a lack of trust or comfort in other members. Sixty-one percent of customers are concerned that other members are misrepresenting themselves and as many as one in three express a lack of trust in other members.

Looking for Love

According to the U.S. Census Bureau, there are 33 million U.S. adult singles that are online and open to pursuing a relationship. Dave Evans, who blogs about the online dating industry at Online Dating Insider, says he believes the number is close to two in five online singles who have tried online dating.

Not everyone is so bullish.

“Everyone who has wanted to do online dating has tried it,” eMarketer’s Belcher says.

However, JupiterResearch reports that only 5 percent of consumers online currently pay for an online dating service – down from 6 percent in 2004.

More than 34 million people visited the top five online dating sites in December 2005 alone. Evans claims the 80/20 rule applies. “The top five sites get 80 percent of the traffic. The remaining 20 percent is split up among the thousands of dating sites out there,” he says.

A January 2006 study by comScore MediaMetrix found the top five online dating sites were: Yahoo! Personals, Match.com sites (including Chemistry), Spark Networks (which owns AmericanSingles, JDate, ChristianMingle, etc.), True and Mate1. Other leading sites that consistently land in the top 10 include eHarmony and FriendFinder (if you include AdultFriendFinder).

“The top rankings seem to be fairly consistent but the numbers for unique visitors vary hugely between comScore and Nielsen,” Mark Brooks, editor of Online Personals Watch, says. “Hitwise uses partnerships with ISPs, Nielsen has a panel and data feedback from a toolbar download and Alexa uses data from its downloadable toolbar.”

Online Dating Insider’s Evans claims some new measurement is needed. “There needs to be a new metric which is a blend of visitors, members and features. Traffic rank certainly reveals popularity but that popularity can be bought and sold via toolbars, spyware, etc.,” he says.

The remaining 20 percent of online daters go to the thousands of smaller online dating sites – many of them niche sites. Niche sites aggregate users with similar interests into a more concise space; which purportedly promotes better, more relative connections. Many believe that niche sites raise the chances of finding more compatible partners rather than going to huge data warehouses like Yahoo! Personals and Match. There are dating sites that cater to Filipinos, Muslim singles, gays and lesbians, farmers, etc.

If a 50-something, female Asian lawyer in Boston wants to try online dating, should she go to a niche site? It depends on how closely she is aligned with the niche. She could go to a site that serves Asians or seniors or to a regionally focused site for the greater Boston area. If she wants to marry another lawyer, LaywersInLove.com would be a good avenue to explore.

“It’s the spear versus the shotgun approach. The shotgun approach throws money, time and energy without much regard for results. The spear approach is targeted, contextual, focused,” Evans says.

James Green, marketing manager for MingleMatch, a Spark Networks property, explains the opportunity of niche sites such as ChristianMingle by saying: “The volume is low but the conversion is high.”

Some niche sites do extremely well. Online Personals Watch’s Brooks says that, JDate, for Jewish singles, has “a lot of word of mouth and brand inertia. Most of their users come from type-ins and the extreme focus of their site.”

Financially, JDate, which charges $34.95 per month, generates average monthly revenue of $29.42 per subscriber and spends an average of just $8.09 to acquire a subscriber.

“It’s a golden site. They own the Jewish segment – no one comes close,” Brooks says. Compare that to a non-niche site like AmericanSingles, which generates an average monthly revenue of $22.16 per subscriber with an average acquisition cost of $43.29.

In general, serious daters are considered to be lucrative – they are more likely to be new to online dating and these unique users provide incremental revenue to sites. They are also considered to be willing to pay higher subscriber costs for advanced features and be longer-term members.

“People think that on serious sites, you’re going to meet people who are more motivated and committed. Because of that, eHarmony attracts people who are serious about finding the right relationship and they can charge $50 per month and require a two-hour profile questionnaire,” Brooks says.

Some sites, such as LavaLife.com, have a reputation for catering to casual daters, many of whom are younger. Because of the churn rate among the more casual sites, Yahoo! Personals and Match.com have each launched premium services, Yahoo! Personals Premium and Chemistry, respectively, to try to capture some of eHarmony’s market share.

Getting Social

Over the last several months, social networking sites such as Facebook, MySpace.com and Hi5.com have gained momentum. Some industry watchers perceive the social networks as a threat to dating sites – mainly because social networking sites are free and fueled by viral marketing.

“MySpace has been so successful because they empower the connectors – the connectors are the people that talk. MySpace hit people at their point of passion; they successfully appealed to the music lovers,” Online Personals Watch’s Brooks says.

Online Dating Insider’s Evans says social networks are hazardous to online dating sites because, “It would be very easy for social networks to add a dating component – all these sites need to do is add check box.”

Others disagree, claiming that dating sites and social networks cater to different customers. A 2006 JupiterResearch report found that the social networking sites pose little threat to the online dating industry.

“Just 14 percent of dating site visitors who don’t pay for subscriptions say they use free sites, like social networks, for online dating instead,” the report states.

While there is some disagreement as to how this will all shake out, nearly everyone concurs that 2006 will be a critical and decisive year in the results. Most agree that there is still opportunity if sites can determine how to capitalize on it.

According to Evans there is certainly potential for growth. “Remember that a significant amount of online users have not tried online dating. The services have to get better to lure them online and into the fold,” he says.

To attract price-sensitive users and to convert registered users who have not subscribed, smaller sites should adopt below-market subscriptions. Discounting and short-term subscriptions “offer the best way for dating sites to grow paid subscriptions and market share,” JupiterResearch’s Elliott says.

The Rules of Attraction

Another way to attract more people is to reach out to a larger universe of users, such as eHarmony’s campaign to target “marrieds” for counseling, or by continuing to spend heavily for online and offline advertising.

It appears that big spending on online and offline advertising will not diminish in 2006. Mike Jones, CEO of Userplane, says, “Everyone is upping each other on marketing dollars, so winning at online dating just becomes another spending war.”

eHarmony, which claims that more than three-quarters of its users come from television advertising and word of mouth, raised $100 million a few years ago and has spent tens of millions of dollars, and possibly more than a hundred million, on advertising in the last few years, according to Elliott.

“You have so many options; that is one of the reasons why eHarmony has put out so many ads – it cuts through the clutter,” says eMarketer’s Belcher. “Branding will be more and more important in the sector because people are familiar with the concept but not the individualized powerhouse of dating sites.”

To help distinguish a dating site from others, branding must be in line with the company’s goals. For example, True has spent a ton of money on advertising, especially with suggestive ads that may raise its profile, but may not attract paying subscribers like serious daters.

“I think we will see more and more high-profile psychologists and relationship advisors such as Dr. Phil getting behind Match.com; sites want some very specific personalities that people can attach themselves to,” Userplane’s Jones says.

Another feature to become more prevalent is personality testing. “I think personality profiling is the future. I think that people will pay for it – I see them charging $100 a month. The technology is just going to get better 10 years out. I don’t think we are there yet.” Tickle and Chemistry offer a variety of tests, as does True, which offers a sexual compatibility test,” Brooks says.

Jones agrees. “A lot of companies are embracing personality profiling systems to facilitate meeting people better.” He thinks we will see more testing on sites – “it will become a necessary component” – but does not foresee sites requiring tests in order to use the service, like eHarmony does.

Differentiators

Security checking is also a big issue for 2006. Illinois State Representative John Bradley proposed a bill that would require any online dating service with members in Illinois to disclose on its website whether it has conducted background checks on members. Not everyone would consider this to be a good thing.

Joe Tracy, the publisher of Online Dating Magazine, estimated that 30 percent of daters using online services are married; a number he believes has steadily risen. Because of this, there are married or recently divorced people who don’t want to disclose that information. “You have a portion of online daters that do not want background checks,” he says. Like personality testing, background checks could be a feature that sites offer but not necessarily require.

Another way that sites are looking to differentiate themselves is by offering the latest technological marvel. “Nowadays, most sites offer or soon will offer live communication tools, especially ones that are audio- and video-enabled,” says Userplane’s Jones. For example, in February, Vivox introduced Tempo, which allows users to connect using a variety of communication tools – voice, video and IM – across various platforms such as the Web, interactive voice response telecom, Internet protocol and mobile phones.

But these bells and whistles “will not be a differentiator for very long because they are easily imitated,” eMarketer’s Belcher says. What matters more in the long run is, “do you have enough potential people on the site that are close by and would be of your same interest group,” he says. “That’s far better than the kind of avatar that you can choose from for your IM on the dating site,” he explains.

Courting Affiliates

For affiliates, the objective is to go after sites that convert. Conventional wisdom would recommend that affiliates focus on the big online dating players – the logic being that the more people who are in the network, the higher the chance of conversions. Also, according to Online Personals Watch’s Brooks, “The top sites have brand equity, which means that they convert better.”

But bigger isn’t always better. Some affiliates have had better luck with smaller sites. Killian of ChristianDatesOnline.com says the niche sites, which have fewer members than the big players, have served him the best – mostly because people who come to his site are “prequalified” – they are looking for Christians who date.

“I do the best on ChristianMingle – I have unbelievable conversion rates, like 70 percent,” he says. “I have not made one dime on Match.com.”

Super-affiliate Rosalind Gardner says, “Many folks are disenchanted with the really large sites that try to be everything to everybody. I actually do better with the smaller niche sites that appeal to specific demographics; for example, interracial or seniors dating.”

According to Brooks it’s a combination of factors.

“The best affiliates do the following: They have unique content where they drive traffic; they have some content that is really geared for getting natural search traffic; and they have PPC [pay per click] on it; or they do a combination of all three,” he says.

An online dating affiliate needs to provide compelling content that is timely and informative to please the visitors of the site and to boost natural ranking. Search engines such as Google are getting more selective and smarter about how it ranks content.

Gardner says the traffic boost from a blog can be huge and that it makes a big difference when running a content site. “I would do everything just like I did when I started but the only difference today is that I would expand my content base faster by adding a blog.”

Many online affiliates have been successful with reviews about each dating site. Some of the successful dating affiliates offer these types of service, including ALoveLinksPlus.com, OnlineDatingMagazine.com and eDateReview.com.

Because daters want to meet people in their area, another successful affiliate approach is to offer a site that has a regional focus, such as Seattle Singles. Michael Brucker, WebEx affiliate manager and former affiliate manager for Yahoo, says that for the affiliate site SinglesOnTheGo.com, “the owners spend a lot of time listing all of the singles events in each city; events such as bowling night, library night and Toastmasters.”

The relationship between affiliate and affiliate manager is paramount; for example, MingleMatch’s Green and Killian communicate almost daily. “I can instant message James a couple of times a day and he will get right back to me. That is not something that is going to happen with Commission Junction,” Killian says.

Stephanie Lewis, affiliate manager for Date.com, says Date.com offers both an internal program and one through Commission Junction. She says the big networks are attractive for new affiliates because they offer the promise of easy reporting and help getting started.

Money Matters

“Some seasoned affiliates are compensated better, they have more flexibility and they don’t have to pay a percentage to CJ. If we paid X amount to CJ, we could give that bonus to the affiliate. Or we could offer a co-branded partnership that we could not do within CJ,” Lewis says.

Payment structures vary widely. The compensations listed on the affiliate splash page are the public (or street) offers. Better affiliates get better rates, based on their value to the affiliate program and the specific requests from affiliates. Payments can be extended 30 percent (and higher) to better- quality affiliates.

Some affiliate programs pay on the first month and subsequent months – which makes a huge difference on what affiliates earn. Many top affiliates negotiate a revenue share based on the subscription and an ongoing percentage for every month the affiliate’s customers remain subscribed.

Gardner says, “I try only to do business with those merchants who offer a fair rev share. Fifteen percent on a digital service simply doesn’t cut it, especially not when I pay to advertise my affiliate sites. 50/50 recurring is my idea of a fair deal on online dating services,” she says. “While I do promote a few big merchants that don’t pay a fair commission rate, I use their names to get people looking around the site, and then direct them to more fair-minded merchants.”

Despite recent buzz that online dating has peaked, there is plenty of evidence that the dating market is just leveling off from its skyrocketing growth and that the segment is still a viable road for affiliates to travel. With the enormous range of sites out there that cater to every religion, race and hobby under the sun, there is sure to be a plethora of keywords and daters for affiliates to target.

Given the surge in traffic and subscribers to the adult dating sites, affiliates who are comfortable dabbling in those racier areas will be able to yield returns for years to come.

ALEXANDRA WHARTONis an editor at Montgomery Research Inc., Revenue’s parent company. During her four years at MRI, she’s edited publications about CRM, supply chain, human performance and healthcare technology. Previously she worked at Internet consulting firm marchFIRST (formerly USWeb/CKS).